Tuesday, March 14, 2017

Lessons From A Successful Independent Trader

Here's a great post from Bella regarding a small independent trader, J. Park, who has grown his account to $100,000--and what that trader did to achieve his success.  Several lessons jump out from his experience:

1)  He failed many times small before finding success - We see this pattern among a surprising number of the Market Wizards that Jack Schwager interviewed.  It took experiences with failure to finally figure out what produced success.  The success came from perseverance and the ability to learn from failures.

2)  He found multiple mentors - I believe this is key.  Whether its chess, athletics, performing arts, or elite military, we find that successful performers are mentored and trained.  The presence of multiple mentors permits an integration of perspectives that eventually leads one to their own distinct approach.  Interestingly, I have known the mentors mentioned by J. Park, such as @InvestorsLive, @Modern_Rock, @kroyrunner, and @MikeBellafiore, to have mentored other successful traders.  Think of all the stars that have come from basketball coaches John Wooden and Coach K:  good mentors produce good performers.

3)  He focused on process - As he points out, we can't control P/L; we can control our trading process:  what we trade and how we trade it.  The successful trader may be discretionary in their decision making, but will not be random.  Successful trading is rule-governed, where the rules are derived from a clear understanding of who is in the market and what they're doing.

There is a fourth ingredient in success, and it helps explain why many successful money managers started out as active, short-term traders.  Short-term trading creates multiple learning trials.  If you are investing and holding positions for six months to a year or more, how many learning trials do you obtain over the course of a career?  The daytrader has 200+ learning trials every year--more if they are using simulation tools, engaging in review of recordings of their trades, etc.  That intensity of learning trials acts as a kind of cognitive gym, building the decision making and pattern recognition skills of the trader.   

All the learning trials in the world, however, will not lead to a cumulative result if they are pursued haphazardly.  The reason we see mentoring as a key ingredient in success across disciplines is that the right teaching guides learning trials toward optimal development.  Great athletes don't just exercise daily; they perform the right exercises.  That is equally true for developing traders.

Further Reading:  Trading With Focus