Trading is a performance Sport. I’ve coached thousands of traders since the early 2010s.
Some of the biggest traders I know know me through my books and I knew them through their work on a major financial market’s website, followed by some great books.
I recently wrote a book Wall Street Secrets and a New article How to Think like a Billionaire. It was one of my money managers friends which fund invests mainly in high growth tech startups like Uber, Airbnb, Facebook, etc.
By way of background, I have over 10 years of experience in the financial markets and I was hired by an investment bank shortly after college in the late 2000s. I have run my own companies since 2011 and I’ve been very fortunate to have gotten to know some of the best traders in the world. Even though all of these traders are very different in personality, temperament and trading style, they all approached the markets in a very professional manager.
As with all great in every industry most were and still obsessed with trading and mastering their craft, trading. The article I’m writing today will share some of the insights I’ve learned form these people.
- Trade Where Others Don’t Trade
When we interviewed one of the star trader featured in Market Wizards, Michael Marcus, who turned $30,000 into $70 million (documented returns) in his home in Malibu, California, we just wanted to know what is the secret of his success.
So we asked him his strategy. He told us to forget about spending so much time on strategies. Instead, he told us to find markets the few others trade in and master those markets.
The big picture as described is Michael is, go to those markets few others know and become great at those markets. Know more about them than anyone else in the world, it will give you a massive competitive edge.
I learned and absorbed this advice 10 years ago and it still applies today. For instance, I’ve carved out a niche in trading highly complex but powerful instruments like options that allowed me to multiply my investment. After some time, you pretty much know intuitively where the edges are because these stock options have predictable personalities. And when something is predictable, it leads to patterns, which can be traded over and over gain.
The other week, I was talking to a friend and professional investor who just turned 70 years old. He’s made his living day trading for decades and he only focuses on 1-3 markets, his primary focus is intruded trading stocks in the S&P and Nasdaq indexes.
At first glance, you would think it’s a crowded market, but as he told me, if you study just a handful of stocks, the began “talking to you”. You might think he is chasing to next set of stocks and fads but he’s not doing this for entertainment. To him, this is a profession and he know his healthy edges will smooth out the profit curve in the long run.
Over the years, I’ve seen many other successful students of mine do the same thing, including the on who only traded one market for years. They became great and wealthy trading one market, often markets or time frame few others trade.
Bottomline, Marcus’ wisdom still applies to my trading today. Go one inch wide and one mile deep instead of one mile wide and one inch deep. You can gain a long term winning edge if you are willing to develop mastery in just one market.
2. Continue Trading
As simple as this sounds, it’s the single best way to improve your trading. Many beginners, especially after a loss, will often stop trading. They become more cautious of the markets and at times become frozen with indecision. Unless one gets in enough hours of “thoughtful” trading (think of the 10,000 hours rule), they’ll never gain the mastery needed to sustain long-term success.
Paper trading is a good way to start, but getting in real repetitions (real trades) and experiencing the ups and downs of live trading is the single best way to learn. For experienced traders facing a drawdown, instead of backing off from trading completely, trade small and start regaining your confidence again. This approach is not only true to trading; it’s true of everything in life.
3. When Driving, Drive. When Trading, Trade
Distractions kill performance, and the younger you are the more this part pertains to you.
Ask yourself this question: Would you want your surgeon texting with his/her kids while he is performing surgery on you? Of course not! You’d want him/her focused. And that same type of focus needs to apply to trading.
When I look at the baby boomer generation like my parents, they’re not distracted — they’re almost always living in the present. Their cellphones are often off, and we kiddingly state it’s because they’re preserving their phone batteries. Even at their advanced age they’re better able to focus than people in their 20s who are continuously distracted, especially by technology and social media.
When I look at our generation (the millennials), we’re a bit less focused but we’re more focused than those younger than us. For example, I intentionally text sparingly most days, and only with close associates and my immediate family. I also intentionally have no social media text notifications. I’m not much different than many of my professional friends who don’t respond to personal texts during business and trading hours. We don’t want to be distracted, especially about personal stuff that is fun to read but diverts the mind. Attention deficit is the biggest problem millennials face today.
Trading firms around the world are dealing with a generation, those aged 23–30, who have a difficult time focusing for long periods of time. They’ll eventually get this figured out. In the meantime, applying practices to increase your focus will lead to greater short-term and long-term results no matter what age you are.
The greater your intensity of focus, the greater success you’ll achieve.
4. Turn Off CNBC & Bloomberg
Don’t keep CNBC in the background. You’ll see prices of stocks and the indexes moving by the sentiment the media create that can steer you away from your trading decisions. Simply observing their hyperbole often leads to an explanation of why markets become overbought and especially oversold on a very short-term basis. Treat financial news portals like an entertainment hub, not a place for you to base your financial decisions. we saw time after time over many years that this sentiment often created by the media has failed to lead to quantified short-term trading edges.
5. Develop a Methodology
Every great trader I know is in constant pursuit of knowledge. They buy trading books, attend courses and webinars, travel to conferences and oftentimes are on the phones for hours talking about trading with fellow traders. One friend of mine, a hedge fund manager who has trading operations around the globe, is all in, all the time. Even though he’s made enough money from trading to last a few generations, he still sends me information from articles he reads that one would consider beginner’s level. He’s a great trader, and in his mind he believes that being exposed to any and all trading information only makes him better. He’s always looking for one more idea that he can apply to further his skills. Now add up all those “ideas” over decades and he earns what he earns because he has more knowledge than just about every- one out there.
You can never be too smart at anything, especially the markets. The more you learn, the more you will likely earn.
6. Join A Community
Be around like-minded people who trade like you do. Smart connections make everyone smarter. Plus, it’s healthier. There are plenty of great
Traders communities out there. One, for example, is the
Chartered MarketTechnician Association. The other, founded by us will be Wall Street Market Makers. CMT have been around for a few decades,
and especially as of late, they have aggregated a number of the better professionals in the industry. You can be part of their community and attend their events both locally and once a year nationally. Another is Quantopian. This is a large community of data-driven traders and they’re a wonderful community to be a part of. Their annual conference QuantCon, held in New York City, is well worth attending. They bring together some of the best minds in quantitative trading in the world to one event. You not only get an opportunity to learn from them but also the opportunity to meet like-minded traders.
Trading just like entrepreneurship can be a lonely pursuit. It’s more enjoyable if you join credible groups that are willing to share their knowledge.
7. Nutrition & Health
Few talk about the role that fitness and nutrition play in trading. They do play a role, though, and in my opinion it’s a very large role.
Study after study has shown people perform better when their body
is healthy and their nutritional intake is clean. It’s common sense, when you think about it. I’ll go back to the surgery example mentioned earlier. All things being equal, ahead of a surgery, would you want your surgeon to drink a Starbucks Frappuccino or eat fast food every day for the past three years that’s going to spike their sugar level ahead of the surgery? Or would you prefer they ate a simple, well-balanced meal?
The same holds true in trading. One of the traders in Schwager’s second
Market Wizards book (The New Mar- ket Wizards) told me that not only did he work out every day in order to improve his trading performance, but he would even skip a cup of coffee on weekdays because it may have impacted his trading decisions. He was in full control of his mind and his body, and he wasn’t going to let anything, including a cup of coffee, get in the way of this control.
Trading is a performance sport
Health matters, fitness matters, nutrition matters. Trading is a performance sport. Anything that can improve your trading, such as simply eating clean food, will potentially have an impact on your results.
Conclusion, this article doesn’t have a single trading strategy in it. Yet from spending so much time with so many “Market Wizards” and other great traders over the years, it has shown us that there’s more to trading than simply to buy a stock and this price and sell at that price.
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By Terrence Hooi
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