If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.- Sun Tzu
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Sun Tzu emphasized the importance of self-mastery in winning wars. Trading is a means of self-development. The reason why trading may be one of the most challenging of all human endeavors is because you begin to know yourself in a way you didn't use to think. You begin to know your deep seated egos, and you begin to know who you really are, your strengths and your weaknesses.
When I think of all the practice hours on the basketball court working on dribbling, rebounding, passing, defending--and when I think of all the practice time in scrimmage getting plays down pat--I realize that game time is just the tip of a large learning iceberg. Trading truly is the only performance domain I know of in which a majority of participants expect to spend less time in practice than in actual live performance. No wonder so many lose money.
If I were a beginning trader and knew what I know now, I'd realize that trading is no less of a business than opening a store or a doctor's office. It requires talents, developed skills, and a clear plan for success. It requires adequate capitalization, and it requires a firm ability to limit overhead during the early, lean years. Fantasies are exciting, but there is so much more to performance success in any discipline.
-Brett Steenbarger
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Why do no trading coaches talk about those personal tragedies and losses? Why don't the stories of the vast majority of traders ever grace the pages of trading magazines and trading books?
I think I know the answer. It's because people don't want to admit that they're wrong. People would rather wait time immemorial rather than to accept their mistakes. But this is essentially what sets apart the great traders from the ones who continually lose their stake. Remember the adage "Cut your losses short, let your profits run." It is so simple in words but is so difficult for people to do.
When I started trading, I told myself that cutting losses would probably be the rule that I can clearly adhere to. Knowing and doing is quite a different thing. When time came to cut those losses, it was a hard thing to do. I'm happy that I have finished cutting them all now but I also realized that I never knew what I was capable of until that time came.
So many traders encounter the same thing. As they say, what is most personal is also most universal. The deep-seated difficulty of cutting losses early on goes against the human nature because we tend to hope when we should be fearing. We tend to fear when we should be relaxing. Greed, hope, fear. These are primordial roots of mankind. This is why technical analysis rooted in human behavior can so easily be used as a trading tool because humans never seem to change. If there's one thing we can bet humans in the future will be doing, they'll be continuing to hope when they shouldn't be. That's why technical analysis is so profitable. Instead of relying on company disclosures, relying on the human market habits have become more superior.
It got me into reflecting not just about trading but about other things. I was in a conversation with an old friend about a theory that good students actually want to be teachers had salaries not been an issue. The reason is because good students have become good students primarily because they've benefited a lot from their teachers, that they want to share that same passion with others who are willing to learn. It's no mystery why teachers can play favorites at times. That's coz they might see themselves in that same eager student. With that positive reinforcement, the good student becomes even better... and so on.
Why did I have to tell in this blog about that theory? Well, it is this.
When you're passionate about something, you want it to grow. You want that something to remain living even when you're dead. You want to find people who share the same passion. You want to teach people. You want to infect others. Remember the saying, loving can never be selfish? Well, i paraphrased that but I think readers get my point.
If we love someone, or something, we are hurt most by it and we are deeply affected by it.
Conversely, we are also passionate about its growth within individuals. My philosophy teacher once told me that love is actually synonymous with growing or something like that.
Great businesses, great trading performances are not done by a lone hand. It's a very difficult process doing everything by yourself.
That's why this blog is a thank you to all the peers that I have who have been an encouragement to me to not back down despite losses. Trading is a process. Trading inevitably will include losses. Life is Life. We cannot be successful overnight. We cannot build Rome in one day. What we can do is we bounce back. We learn our mistakes. We grow what we love.
My special thanks goes to Grapebunch of Absolute Traders and everyone in that community.
Thanks.
- nix