We’ve all experienced ups and downs in our trading. We make tweaks, and what we feel are improvements, doing our best to adapt to changing market conditions.
One of the more frustrating aspects of being a trader is knowing (or not knowing for that matter) when to trade various strategies and on which markets.
It’s become clear to me that in order to make it as a trader you do need a little luck on your side. Which is to say that we all create our own luck, true?
“The harder I work the luckier I get!”
This is a phrase I often hear successful people use and it really is true. Yes, it’s nice to “catch a break,” or get in to a reversal position just as the markets are beginning to turn, but a lot of this “luck” can be created yourself. It stems from hours and hours spent in front of the screen both during and after market hours.
The Rich Get Richer, the Lucky Get Luckier
I consider myself lucky, but I also work very hard (and I’d like to think I work smart). The methods I’ve developed during my trading journey are unique to my tolerance for risk, time management, and patience level.
The iterative and constant process of adapting has a much greater impact to our trading than the dollar signs in our account lead us to believe. When you really get to understand how a system or market works based of personal observations, live trading, and back testing, nuances and obscure price movements stand out.
Observing market cycles and taking copious notes on what we think is going to happen (pre-event), what we believe should happen, and what actually happens (post-event) is a great way to develop and prepare our thought process for everyday and larger macro market movements.
As we age, we all live though experiences that shape us. Perhaps, more so in trading than in other disciplines, our past experiences have a great impact on the way we approach and react to the markets.
Adapting to changing market conditions is something all traders must do in our own way. To some, when the going gets tough, the weak and apathetic minded individuals give up or say it can’ t be done, while the strong willed and those passionate about their craft push on.
Here’s a video tribute to traders that I put together, some are comical, some more serious.
Deliberately Seek Out Criticism
For me, I’m always questioning, analyzing, and sharing my ideas with others to gain feedback and new perspectives. Only when I understand the opposing side completely do I feel comfortable with my own view points. Even though I stubbornly grasp onto my ideas, I’m always willing to entertain the other side.
Don’t get me wrong, stubbornness can be a good thing (at times). When my car wouldn’t start, and after multiple attempted to jump it, my friend suggested that I replace the battery. “That can’t be it,” I thought. I had just tested it a week ago and knew the battery was working fine.
After some initial frustration, I gave it another go, swapping cables and letting the battery charge for a few minutes and she started right up. Stubbornness is a byproduct of perseverance and it’s the value in expecting nothing less than the best from ourselves that allows us to achieve great things.
Darwinism at Its Finest
I find that this perseverance or “survival of the fittest” mentality has taken me farther than my adversaries. When confronted with a daunting task which do you instinctively turn to, fight or flight? It’s nearly impossible to control our instinctive reactions. To change our mindset takes time; months if not years.
It takes conscious effort to reshape the way our trading mind reacts instinctively. What we do have control over are the people we associate with, the places we go, and the external sources we expose ourselves to.
Be the selector, the hunter, not the hunted. Put yourself in opportunistic situations.
I’ve found that the more I surround myself with people who hold similar principles and morals, the closer I become to being the person I wish to be.
Clarity of Thought Leads to Mastery
The better we can identify who we are as individuals, the easier it will be to identify which style of trading is right for each of us. Clarity of our ideas and a simplification to the core principles leads to the mastery of our craft. Leo Babauta of Zen Habits has some great ideas for simplifying your lifestyle to bring greater happiness.
So to come full circle, while it is certain market conditions will change, our guiding principles and general market beliefs should remain constant.
It is with these principles that our trading systems are derived. Therefore as volatility fluctuates, market cycles roll over, and economic conditions ebb and flow over the years, we need to hold a strong conviction to our core ideology.
Here are some of the things I strongly believe about the markets, they may or may not seem important to you, but all that matters whatever you believe in, you believe whole heartedly.
The market is an aggregate of human emotions
The outcome of each individual trade is unpredictable
The better prepared trader has the greatest chance of success
Be patient with profits, quick with losses
One cannot avoid losing trades
A stock is never too high to buy or too low to sell
The best trades are winners from the start
Always know where you would be proven wrong on a trade before you enter
When in doubt, cut your position size in half
No two trades are exactly alike
As long as humans exist, a market will exist
The stock market as a whole is an unbeatable game. That is, no system out there can win 100% of the time over the long term. As traders we can however, profit from its fluctuations, price imbalances, and knowledge we have about various trends and patterns.
At the end of the day, we all face challenges. In trading, as in all business ventures it comes down to the economics of opportunity cost.
As Steve Jobs once said, “If today were the last day of my life, would I want to do what I’m about to do today?”
Excluding the monetary aspect, trading is a journey towards finding ourselves, who we are, and what we truly believe in.
Follow your passion and do what you love as that will lead to the greatest richness of all, true happiness.