Sunday, October 25, 2009

The Weekend Trader - 2009 Lessons

While this year hasn't officially ended, a good part of mine has as I mentally begin yet another phase of my trading career. btw, do we really need a calendar to define when something begins and/or ends?

So as I turn another page, here are some trading and life lessons I've learned -- or that have been reinforced -- over the last several months.

The concept of outliers is critical. In my view, and in terms of trade population, optimal trading is all about 50% modest wins, 30% small losses, 15% home runs, and 5% bonehead moves. Yet in terms of net trading results, the 15% home runs will often exceed the 50% modest wins. And it doesn't matter whether you're talking about a trading day, week, month, year, or career, as the impact is the same. The same is of course true in spades in Poker. Do a blog search on "outliers" for related concepts.

When others criticize, you're probably on the right track. Some in this world will always try to tear others down, and nothing you can do will ever change that. To this day, many continue to ignore the lesson of all lessons of 2,000 years ago.

Not everyone likes a winning team. Consider this one a warning to the Jellies in the ongoing networking trading room. Every winning team has its haters -- whether it be the Celtics, Lakers, Yankees, or Patriots. Don't expect it to be any different in trading. On the other hand, those that are smart will try to emulate the success.

Traders looking for trading to satisfy a social or ego outlet need will never be successful. Fact.

You don't have to be a star to contribute to (or benefit from) a team. Some of the top performing Jellies were of the unsung and quiet type.

A good team will often encourage open, healthy debate. In the spirit of determing the best course of action, multiple sets of professional eyes looking for the same thing are often better than one ... so long as it doesn't detract from an individual trader's eventual conviction to act.

When in doubt, go with your gut. It helps keep overthinking to a minimum, whether it be a trade or business plan. Plus, an experienced trader's "gut" is often simply the unconscious bubbling up of years of pattern and profit recognition.

No streak, good or bad, lasts forever. I tried to preach this over and over during my 2008-09 run. As I said at the time, zero losses in January, and only 3 losses in the first quarter is not normal. Neither was the summer funk. Enjoy the good times and bank it just as squirrels store up the acorns. It will help you deal with the occasional funk.

When in a funk, reach out to others. Friday's post says it all on that one.

Don't try so hard. I'd say more about this, but I stink at it and try not to talk about things I don't do well.

In everything you do, give it your all. There will be time to rest when we retire. Yea, I know ... me retire? Right. Well, maybe when I'm six feet under.

Effective teaching requires as much commitment, focus, and intensity as effective trading. I was often exhausted at the end of each day of the Jellie efforts, which is the main reason some of the blog posts didn't appear until midnight.

Don't ever let others define your goals. It's likely because they were unable to define their own.

Truly good traders will earn far more from trading than teaching. From a pure bottom line perspective, this is why my return to the educational field was always and only intended on being interim. Nothing has changed there as I begin my transition back to full-time trader.

Take time to rest. Again, my commenting on this would be like the coughing doctor telling you to quit smoking. All I'll say is even God rested on the seventh day, and that by itself should be enough to tell me to slow down at times.

Students are often the best teachers.
Sometimes teachers need to be better listeners. That's one area where I could have done better over the last few months.

The market is an even better teacher. Solid formal education can and should significantly reduce the cost of real-world lessons, yet the market often provides the best lessons.

Take care of your body. OK, I'm slowly learning on this one.

48 is not old. Thanks to all those reminding me of this one.

I'm sure there are more, yet suffice it to say that when this year is officially over, 2009 will have been more personally satisfying than 2008.

After all, I'll hopefully be another year smarter.

As for the P&L? It's just fine :-).


Max Ghello said...

excellent post Don!

good week everyone!

for me too :)


Rich said...

In every top trader I have read interviews of, or have studied, the statement is the same. They have made the big money from a small percentage of their trades. Basically, small wins, small losses, big wins, big losses. Big losses are eliminated by a plan, good risk management and discipline. Small wins and small losses cancel each other and the trader is then left with large wins. Good blog, Don!