Saturday, July 11, 2015

Thoughts On Life And Trading

*  There are many ways to achieve, but I know of none that does not involve a willingness to tolerate discomfort.  Our boundaries are what make us feel comfortable; pushing our boundaries is what achievement requires.  In life as in the gym, if you're not breaking a sweat, you're not building your fitness.  If you want to develop a part of yourself, that development requires regular workouts.

*  I'm not sure people can make positive changes in their lives without first changing their internal dialogues.  Can we really sustain new patterns of behavior if we're sustaining the same old thought patterns?  As noted in the recent article, keeping a journal can be a structured method for changing our self-talk.  Not many traders actually use journals that way.  But we really can reprogram ourselves.  We eat well, sleep well, exercise--do a lot of things to maintain our hardware.  That won't get us where we want, however, if we're running faulty software.

*  Keep trading simple and don't overthink things.  I've worked with many successful traders and portfolio managers.  None has ever held that view.  Seriously.  None.

*  What traders mean when they say a market is choppy is that it is not following a linear price path.  They assume, therefore, that price action is random and untradeable.  Suppose, however, that choppy markets are simply ones in which non-linear (cyclical) price influences dominate linear (trending) ones.  A choppy market could be a very tradeable one if there is a stable pattern of cyclical behavior.  If one has no method for testing for non-linear regularities, however, trading success would be limited to trading straight lines.  Not all trading failures can be attributed to psychology.

*  If you desire success in markets and have developed no unique, concrete way of achieving it, you aren't pursuing your dream; you're pursuing a fantasy.  Successful traders talk about markets and trading.  Wannabees talk about themselves and their "passion" for trading.  Is there any more powerful confession of incompetence than a longstanding passion devoid of achievement?

*  The hardest lesson I have learned as a trader is to understand and accept what I do best in markets.  There are traders and there are investors:  fast thinkers good at pattern recognition and slow, deep thinkers good at analysis.  There are aggressive risk takers who achieve absolute returns and there are balanced risk takers who achieve superior risk-adjusted returns.  These are fundamental differences of cognitive and personality style.  Great traders are rarely, rarely great at all styles.  We find our success by leveraging our distinctive strengths.  But that means we must truly understand and embrace our strengths.

*  The people I know who are really good at networking with trading colleagues are those who have something of value to share, not those who are focused on their need to learn from others.  There's something to be said for being a sponge when you're learning, but there's nothing quite so deadly as a room full of sponges.  That's why I put out my challenge for the September T4AC conference event.

Further Reading:  Trading Psychology Articles