Tuesday, May 29th, 2007
Finding a stock-trading style you love
I was standing in Borders today pondering whether to buy Brett Steenbarger’s 
Enhancing Trader Performance.
The price was a steep $A81. But for some reason I ended up saying to myself, “I can’t afford not to buy this book.” (When I went to the counter I was pleasantly surprised the book was actually $A55!)
I’ve read the first few chapters and have already decided it’s one of the most important trading books you can read.
Steenbarger discusses one of the most important aspects of trading performance: finding what you love to trade.
When traders get off track and lack discipline they assume there is something wrong with them and their emotions. That may be true, but Steenbarger thinks there’s another reason; the trader is simply not that interested in the time-frame or market they’re trading.
Most traders begin trading and then find a guru. The guru hands down some laws to the newbie, such as “let your profits run”. The guru then keeps emphasizing that discipline in letting your profits run is crucial.
The newbie puts on a trade and holds on through thick and thin to let profits run. For a while it works fine.
But then a funny thing happens. The newbie finds it impossible to let profits run and constantly has an urge to take profits, particularly when he sees most of them disappear after holding on.
Boredom also kicks in and he makes quick, poorly planned trades to satisfy a desire of action.
Steenbarger has a simple explanation: “Their loss of discipline is intuitive gravitations to their natural trading styles.”
In the case outlined above, the trader clearly isn’t a trend follower. He clearly wants action, quick profits, quick feedback
etc. He’s doomed to failure by trying to stick to something he’s not suited to.
“When you have found your niche, you don’t need discipline to do the right things; you won’t want to do anything else,” Steenbarger adds.
I can’t emphasise how important this concept is.
(Article continues)
Most traders never explore what kinds of markets and trading styles they have a passion for; mainly because they fall under the influence of a dogmatic guru.
Two of the most dangerous things I’m finding in life are prestige and charismatic people. They both to serve to distract you from what you really want to do — prestige because when you do something prestigious other people are impressed (even though you don’t really want to); and charismatic people because they persuade to do what they think is important – not what you think is!
If you keep sabotaging your trading, along with other factors, be sure to explore whether you’re passionate about the style of trading you’re doing. Make sure you’re not implementing a poorly suited system just because it was handed down by a guru.
Steenbarger suggests every trader find out what’s fun for them. That means exploring other strategies and experimenting. If you’re a trend follower, swing trade; if you trade equities, try currencies; if you’re a technical trader, have a go at some fundamentals.
Don’t be afraid. You may just stumble on your passion and become one of the rare trading greats!
Word Count: 506. This entry was posted on Tuesday, May 29th, 2007 at 11:04 am and is filed under Growth investing, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
