Sunday, June 07, 2015

Getting all the pieces in your own trading jigsaw together

The big difference between a winning trader and the rest is they will acknowledge whenever they have screwed up, and endeavour to avoid making the same mistakes in the future. In other words, they accept what has happened, take responsibility for their actions, do not blame others, identify what caused the mistake(s), and take the necessary steps to improve their performance.

Go through books like the Market Wizards series and even a majority of those great traders have gone through this process. As Ed Seykota famously said in his own Market Wizards interview:

"A losing trader can do little to transform himself into a winning trader. A losing trader is not going to want to transform himself. That's the kind of thing winning traders do."

These traders all have certain characteristic traits - commitment, discipline and patience are among them. However, as Napoleon Hill said, passion and desire come at the top.

"I feel my success comes from my love of the markets. I am not a casual trader. It is my life. I have a passion for trading. It is not merely a hobby or even a career choice for me. There is no question that this is what I am supposed to do with my life." - Ed Seykota

When I meet new people who are interested in learning about trading, I can quickly tell who has that level of desire or passion. Becoming a successful trader and consistently profitable is akin to fitting all the pieces of a jigsaw puzzle together, and once the puzzle is complete making sure no bits fall out or suddenly disappear.

The more pieces you can fit together, the better you will become, but it won't always immediately appear so from your results. A trader can only be missing one element, but they could be just as far away from succeeding (in monetary terms) as someone who has several pieces missing. However, when you understand what bits you do have in place, you can generally work out what elements are missing.

Once you have done that, then the question becomes working out a plan to correct those deficiencies. Some people can do this on their own, others may need assistance or guidance in putting everything together. Sometimes a trader may toil away on their own and still not be able to make that breakthrough. This could simply be as a result of how a potential solution is communicated to them.

This can particularly be the case when it comes to risk or psychology. When discussing an issue, it might need explaining in a different way, or possibly several different ways, before the student has his 'Aha!' moment and he fully understands what he is trying to do and the underlying reasons why.

This is the limitation of learning from the written page. Some people can learn successfully from books. The underlying message may be 100% right, but the style or way it is written may resonate with some people, and not with others.

The other obvious limitation by learning from books, or even reading material on social media or the internet is that you often don't have the ability to ask questions with the author, clarify certain points, or be able to bounce ideas so that you get to the 'Aha!' moment. Again, whatever material you read may be giving you a suitable solution to solve your own puzzle, but if its not communicated or written in a manner that is appropriate for you, then you won't necessarily have that 'Aha!' moment.

But, if that person has the desire to succeed, they will find a way either by themselves, or they will accept they need guidance and will look for someone who can help them find the missing piece of their jigsaw.

Just over a year ago, I got an email out of the blue from a trader who was keen to improve. I knew his name, as he had bought my e-book a couple of years prior to that, but for whatever reason he hadn't been able to get to the level where he was able to make it work for him. So we started working together in the mentoring programme, went through everything, and slowly started to make the necessary changes. And that worked - his performance last year was better than my own, and he has continued to improve, both in his understanding and execution. The pieces of the jigsaw are all falling into place. Other people have gone through the same process.

Sometimes these people need encouraging, other times they might need to be told a few home truths, and get the hairdryer treatment, if their commitment is wavering. One such guy has gone through this, as I mentioned his progress here.  Slowly and surely, we are locating and putting in the missing pieces of his jigsaw, and he is now reaping the rewards, being well up for the current year-to-date.

Some people get it quickly, some take a bit more time.

The common denominator here is that people like these had the passion, drive and desire to improve, and were prepared to remain committed so they could get to that 'Aha!' moment and complete their puzzle.  They could easily have taken the view that "this is not for me, its not working, I will ditch it, and switch to a different method", but they didn't. Their desire to succeed, and their commitment kept them going. Just as importantly, they are continuing to work on themselves and refining their skills and method, to further improve.

The other point is that people can sometimes be too proud to admit they can't solve things on their own. They may see it as an admission of failure. Others may baulk at finding someone to help them solve their puzzle, even though if they have only one missing piece. The cost of getting help which can turn everything around may be many multiples smaller than the losses they continue to build up (or the lost profits) by refusing to get help.

I know someone who initially decided against working with me because of cost, only to run up further losses in five figures before he admitted defeat, and we started working together, and were able to start sorting things out.

Unfortunately, you can come across people who decide they need help and, however much you tell them, and in whatever method or style you use to communicate with them, they can't (or won't) change the very issues or elements that are letting them down. Ultimately, despite what I (or any other trading coach or mentor) may tell you, ultimately you have to be open to change, to admit they need to change some part of their trading approach, and then follow through and put into practice those changes.

"Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money." - Ed Seykota

Or, as Einstein said, the definition of insanity is doing the same thing over and over again and expecting different results.

Often these type of people will happily blame others rather than their own failings for not being successful. I talked more about this here.

If you feel you are missing a piece of your own trading jigsaw, then work out exactly what is missing, and put a plan in place to effect the necessary changes. If you can't, then I'd be delighted to help.

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