Trading Mistakes

BarroMetrics Views: Trading Mistakes

I concluded a Habits of Success Class last week. As is my wont, I make post seminar notes on the participants – perceived strengths, weaknesses, likelihood of their future success etc. I also look to identify the perceived ‘single most important stumbling block’. This exercise allows me to expand my own skills.

Given my time constraints, I thought a short series on common mistakes would be useful.

There are two reasons why we fail at trading:

  1. We don’t know what to do; and/or
  2. We don’t do what we know.

The first stumbling block falls within the first category – what I call ‘unrealistic expectations’. In Singapore, we see the ads just about everytime we open the local paper. Ads promising untold riches, with no money down and no effort beyond 15-minutes to 30-minutes a day – in short, become rich without effort to acquire the skills, become rich without the necessary capital, become rich without the effort of knowing and applying the necessary skills.

I find it interesting that of the thousands that attend the seminars and workshops, not one would believe we could become a heart surgeon in a weekend seminar, but many would believe that we can become instant investing/trading experts – never mind that K Anders Ericsson, probably the leading authority on expertise, estimates it takes about 10,000 hours to acquire expertise in any field. To become competent and a master at anything, It’s not a question of inborn talent, it’s more about the time and effort you put it. And, that effort takes a specific form which Ericsson calls ‘Deliberative Practice’. For an outline of the Deliberative Practice method see the blog “The Essential Nature of Markets“.

(I linked an excellent article I saw in the Australian on Ericsson – well worth reading)

3 thoughts on “Trading Mistakes”

  1. I like the way you say it as it is. One doesn’t become anything in no time, except dead. Trading, like any other profession, needs practice, practice, practice, besides good tuitions.

  2. (Someone wrote on 23 May 2012 that according to the book “Hedge Fund Market Wizards” by Jack Schwager)

    The Road to Success Is Paved with Mistakes
    Ray Dalio, the founder of Bridgewater, the world’s largest hedge fund, strongly believes that learning from mistakes is essential to improvement and ultimate success. Each mistake, if recognized and acted upon, provides an opportunity for improving a trading approach. Most traders would benefit by writing down each mistake, the implied lesson, and the intended change in the trading process. Such a trading log can be periodically reviewed for reinforcement. Trading mistakes cannot be avoided, but repeating the same mistakes can be, and doing so is often the difference between success and failure.

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