One advantage of trading experience is perspective. There are ebbs and flows to the market. There are natural periods where we slump. And there is a learning curve that the new trader must overcome. Let’s discuss.
In the book that I am currently writing for Wiley, I start a chapter explaining that there are way too many people walking around the streets of NYC thinking that they can become the next great trader on the Street. The truth is because of many factors, temperament, lack of passion for the markets, lack of history of success, etc., they are unlikely to become a consistently profitable trader unless they make serious life changes. But what is also true, and this is more important, is that there are so many who can become great traders who never do. Many do not give trading enough time. Some are not trained well. A minority do not do the work necessary to become successful. And it is also partly because they lack perspective.
There are ebbs and flows to the market. When I started I met the Asian Financial Crisis. For the first time in our firm’s history people were being fired. This was after a few years of the median trader making 250k plus. And I had to survive this period. That year there were three great months of trading and 9 poor months. I did. After the internet bubble bursted I needed to remake myself as a trader and grind it out for 5 years. And I did becoming a more well rounded trader during this period. And then came subprime and the near recent collapse of our banking system. This was a great trading market. And now a new market has premiered. This is still an excellent trading market, ripe with opportunities, but our trading requires adjustments to capture these trades.
And these adjustment are simple. What patterns are working best for you in this market? Spend this weekend making a list of the patterns that are working best for you. And then spend next week executing on those set ups.
There is nothing a firm can do to eliminate the learning curve. Most struggle at first. You will have doubts that you can make it. This is natural. Your numbers most likely will not reflect your true potential when you start. And this is just the way it is. Focus on getting better everyday and not your P&L. Understand that your are developing trading skills so that in Year 3 you can make a killing. Because the first year will be challenging, the second better but still difficult, and only the third where you will start to recognize your potential. Crunching your trading numbers after 6 months and making conclusions about your trading ability is not in your self-interest.
And then we all slump. One of our most competitive traders met with me a few weeks ago apologetic about his recent slide. I laugh thinking about how many slumps I have been through in my trading career. How many times I have wondered if this was the end for me. This is a healthy process. It forces you to focus on what you do best as a trader and then execute. You either get better or go home.
So for this most competitive trader I suggested that he only make his best trades for the next week, set a goal to just be positive, and lower his tier size. He went right back to making money. This did not surprise me in the slightest. I have 12 years of trading perspective.
Apparently the prop trading public did not do as well in June as the Spring given the emails sent to me, phone calls I have received, and anecdotes shared by other firms. Sometimes a trading year only offers 3-4 excellent trading months in a year. The other months you grind it out and pay the bills. Look if you have made money trading in the past you will going forward. If you are a new trader and you do the things required you will be fine. And this is a market still ripe with opportunity. Anyway I thought I would just offer my perspective.
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12 Comments on “Perspective”
Thanks for the wisdom, Mike! Have a happy 4th!
Thanks for the wisdom, Mike! Have a happy 4th!
thanks for the great perspectives. can’t wait for your book!
thanks for the great perspectives. can’t wait for your book!
great post mike, thanks. Would you mind expanding on what the life changes are that one would need to make to become a consistently profitable trader? Thanks
great post mike, thanks. Would you mind expanding on what the life changes are that one would need to make to become a consistently profitable trader? Thanks
Evan,
I will offer one example of a life change. It is unlikely that you will be a disciplined trader if you are not disciplined in other areas of your life. So if you want to become a disciplined trader you are going to have to in fact first become a disciplined person.
Enjoy the weekend.
Bella
Mike I really appreciate your post those who are inspired to be great traders need your 12 years of Market insight. Thank you
Mike I really appreciate your post those who are inspired to be great traders need your 12 years of Market insight. Thank you
Good suggestion. I am struggling after part time trading for a few years and now at the break even level. I am only going to trade my 3 best edges and email you the results after 2 weeks. The 3 edges that are by best are:
1. Open trade on a stock in play (where did I learn that 🙂
2. ACD opening range break using 15 minute period as the OR
3. A stock in the market trend that makes it second pass through the OR in the direction of the SPY
Good post. I think traders are sort of like fishermen, in that we experience such wide fluctuations of money flow. It just adds to the psychological nature of trading. Have a great 4th!
Good post. I think traders are sort of like fishermen, in that we experience such wide fluctuations of money flow. It just adds to the psychological nature of trading. Have a great 4th!