I am constantly surprised by the expectations of seminar participants. Too many seem to believe that at the end of the two or three days, ‘insto-presto, I’ll be one of the world’s best traders!’ It doesn’t help the newbie that too many educators encourage this belief.
The fact is expertise will take time. The very best we can hope for at the end of a seminar is a foundation and a set of actions upon which we can build habits of success. The end of the seminar is but the first step in a never-ending journey of continuing education and self-improvement.
As a part-time educator, one of my major outcomes is to ensure the student makes the plan his own. By this I mean, he takes what is taught, learns the fundamentals and nuances of the method, and then imposes his own personality. Given that each of us has a unique combination and set of experiences, beliefs and values, it is highly unlikely that any method will fit you perfectly. So your job as a student is to ensure that you internalize the method and then go about making studied changes.
By studied changes I mean changes for which the outcomes are recorded. We then study the outcomes to see if any changes we have made have resulted in improved profitability. The students who have graduated from STC (my mentor course), have all shown this ability.
You have seen Dr. Peter Whitnall’s ‘Wham‘ contribution. It’s an interesting method using exponential moving averages as its main tool.
Pete W graduated from the STC and all graduates know how much I ‘love’ moving averages – well alright, actually I do acknowledge they have a place in identifying the zone and strength of trend. But for me, moving averages suck as trend identifiers. Bearing this ‘love’ of mine in mind and knowing that Pete W was one of the more successful graduates, you see the point I am making. Moving Averages may not suit my personality but they certainly suit Pete W’s. He took my material and blended it with tools and materials that suited him and became a successful trader.
This brings me to the second point of this blog.
In ‘What I Learned Losing a Million Dollars’, Jim Paul makes the valid point that there are as many successful methods to winning in the markets as there are personalities – from Warren Buffett’s ultra long-term, fundamental approach to Marty (Buzz) Schwartz’s day-trading, technical method. Take a look at some of the quotes Jim gathered:
- “I haven’t met a rich technician” – Jim Rogers.
- “I always laugh at people who say “I’ve never met a rich technician” I love that! Its such an arrogant, nonsensical response. I used fundamentals for 9 years and got rich as a technician” – Mary Schwartz.
- “Diversify your investments” – John Templeton.
- “Diversification is a hedge for ignorance” – William O’Neil.
- “Don’t bottom fish” – Peter Lynch
- “I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms.” – Paul Tudor Jones.
But all successful traders have one thing in common – they accept and manage risk. Yet, this is one aspect of a newbie’s education that is usually given, at best, a cursory once-over. More often, it is emphasized only by its asbsence – when the account blows up.
Like the trading method, how you manage risk is dependent on your personality. For example: in my case, I prefer partial exits. I know that in strongly trending markets, this method adversely affects my bottom line. But for me, the partial exits smooth out my equity curve. Partial exits are but one application of the first principle of my trading philosophy : Above all, protect your capital. Despite its success for me, my risk management approach is unlikely to suit someone with a higher risk tolerance.
So, over to you: does your trading plan and money management suit your personality?