Tuesday, October 07, 2014

Finding Your Trading Future

Consider your values now and what you believe your values will be ten years from now.  How much change do you think there will be?

Consider your personality traits.  How much change do you think you'll see in your personality over the next ten years?

And how about your interests?  How will those change in ten years?

As Dan Gilbert points out in his TED Talk, people systematically underestimate the changes they go through over time.  We inevitably change far more than we think we will change.

I see this very often in the trading world, where preparing for the coming day and week takes precedence over preparing for a long-term horizon.  When I examine how much time traders spend to prepare for the future by developing new sources of edge, I'm floored.  It's as if markets will never change; the future will bring no new demands and challenges.  We assume that edges will last forever and, by default, we will trade in our accustomed way indefinitely.

At the recent Traders4ACause conference, I made an observation.  The greatest threat for new and early career traders is a loss of emotional self-control.  The greatest challenge for experienced traders is the threat of obsolescence.  New traders have to make themselves, and a big part of that is rewiring themselves emotionally to not act on the first natural, human impulses.  Experienced traders have made themselves, but periodically have to remake themselves.  The setups and trading patterns we expect over time will undergo change and we will be challenged to keep up with them--and hopefully anticipate them.

If we underestimate the degree to which we will change, it suggests that change will happen to us; it won't be planned by us.  This is why I like some portion of a trader's process devoted to innovation:  looking at new potential sources of edge.  If innovation is embedded in what you do each week, you create an evolution and won't be forced into revolutionary changes after markets have already shifted and drawdowns have occurred.

"Anyone who fights for the future," Ayn Rand observed, "lives in it today."  Gilbert's observations suggest the reverse, as well:  living in the future is the best way of fighting for it now.

Further Reading:  The Heroic Dimensions of Trading