Thursday, 12 November 2009

How to Succeed by Really Trying

Kiki and I had an interesting conversation about learning to trade. I told her about a couple of quotations I had read:
"The harder I work, the luckier I get" and
"Genius is 98% perspiration and only 2% inspiration".
These sayings are the basis for learning how to trade. Why? Because no one lives long enough to learn everything they need to learn starting from scratch. To be successful, we absolutely, positively have to find people who have already paid the price to learn the things we need to learn to achieve our goals.  Perhaps even a person/coach to correct problems after you have become professional/successful in your field.  Why do you think professional athletes have coaches?  Even Tiger Woods has a coach.  Enough said.

Now let me tell you about a book: The Talent Code: Greatness Isn't Born. It's Grown. Here's How.  Here is the link to Amazon that tells you all about it. There is a short video that's worth watching.

The author found a number of schools throughout the world that produced a statistically significant greater number of people of excellence at things such as tennis, golf, music and other things. He then looked to see what these schools had in common. Without trying to summarise the book, the main idea seems to be lots of practice but slowed down. For example, a pianist plays the music very slowly. So slowly that if any listener hears it and can recognise it then they are playing too fast.

Now there are people who think that simulated trading is useless and a waste of time. I am not one of those. Yes, simulated trading does not provide the stress and require decision making with monetary consequences that live trading does, but that is not the purpose of simulated trading. Simulated trading should be used to create the equivalent of "muscle memory" that athletes develop so that a trader can react automatically to the market without thinking. This can only happen after hundreds, perhaps thousands of hours of so called screen time. Now if you add to this process by first using market replay in slow motion you may be able to shorten and strengthen the learning curve.

So for me, the progression after you have found a trading edge, is to first do slow market replay, then trade real time simulation, then real time with real money but only of an inconsequential size so that losses really don't matter to you, then scaling to larger and larger size as you make money. The qualification for the progression through each of these stages is the achievement of consistent profitability at the stage you are at.

I had started teaching Kiki with a trading manual I had created and some videos I had made for her. These set out exactly how a trader trades.  From pre-trade preparation to putting the trade on and then managing it.

Next, when she had worked through that and understood exactly what was required, she did market replays, slowly. All this was after work.

When she was consistently profitable we went onto a simulator in real time after work. When that was profitable she took two weeks holiday and stayed on the simulator until she was more than consistently profitable. I was looking for relaxed trading, reacting automatically to what the market did. This was successful so she quit her job and went back on the simulator until I was satisfied.

She had saved up the equivalent of about $10,000 and went live trading three contracts of either the ES or the Dow Euro 50, depending upon what we expected the day to be.

Today started off slowly. I think that the market was expecting something more from President Obama and so the market waited. There was a little disappointment after the speech and the market traded down into the U.S. lunch, our dinner time.

Click to enlarge


  1. Hello, would you teach me your strategy?

  2. What an interesting blog. I have seen trading the old way, and a modern variation via phone, but this is the first pure electronic one I've found that doesn't reek of luck, or worse, just pure B.S.

    Kiki is lucky to have you for a Dad. Best of trading to you both!