A Tale of Two Traders
Option Addict
As I have packed and prepared for a nice long vacation over the next 10 days, I can't help but sit back and reflect over the calamitous occurrences that have come about over the last week. As I mentioned yesterday, I think a lot of it has to do with when markets change. Nobody has a perfect recipe for predicting these things consistently. In fact, I have been touted plenty for my bullish sentiment as the Dow got 2,000 points richer over the last few months. You'll grow to find that trading becomes less entertaining when the focus deviates from making money in droves.
I read a story last night on the Marketcast from Steenbarger's book "Enhancing Trader Performance." I won't tell the story, but I will give a quick summary...
Two traders, both professionals, both trading the ES futures contract under Dr Brett's supervision. "Trader A" has a long bias in the morning, the trade goes against him, calmly stops and reverses, gets on the short side, scalps a few bucks, before getting stopped out on another reversal to the upside. He decides to walk away, have a lunch, and come back refreshed and ready to try again in the afternoon.
"Trader B" was also long to start off the day, the market went against him, he didn't get out, let the loss surpass his stop, yelled and screamed in the process, and eventually caught a move to the upside before getting out. Instead of taking a lunch, he used the time to review his trade to see what he did wrong, could have improved on, and brought that to the table on the next trade later in the afternoon. At the end of the day, one trader walked away with a high 5 figure sum, the other struggled two make profits on the day.
Who made the money?
"Trader B."
In the end, "Trader B" had much more market exposure, has spent time practicing to sharpen his skills, and was able to learn from his mistakes. "Trader A" while being more disciplined and un emotional, didn't take the time to learn from his mistakes and better his abilities.
My intentions were cunning as I wanted to point out a characteristic that I hope everyone here does not overshadow. It is in my opinion, what separates success from failure. It is what you will inherently need to push you over the hill. It is hard-work ethic.
A trade gone bad always has a reason behind it. Whether you took the trade at the wrong time, chose the wrong stock, over looked a pre existing condition, or whatever; there is a reason. The question is, did you take the time to look over the damage and figure out why?
The near misses and losses in my career have been the most valuable components to building my skill set and performing at a higher level. I view losses as one of the greatest contributors to my success. They teach me more about trading than when I make money. I never study why I make money because I know the answer. It is when I lose that my mistakes provide me the greatest opportunity to learn; because I work hard to study them and figure out why.
That is all I got for today. I plan to trade from the beach next week, which means I will update the blog daily with razor sharp insights, witty and cunning syntax, and copious amounts of desirable trade ideas.
Have a good weekend, and let's all focus on getting back to business.
Regards,
The Option Addict
View Printer Friendly Version
Email Article to Friend