by Janice Dorn M.D., Ph.D.
www.thetradingdoctor.com
You have to live the life you're given
And never close your eyes!
You hold on and stare into the skies
And burn against the cold
For any moment you might find the gold!
...From The Gold by Linda Eder, Music: Frank Wildhorn, Lyrics: Nan Nighton
From 1897 to 1900, 200,000 people started to the Klondike and only 30,000 reached it (1 in 6). Not more than 400 found any gold (1 in 500) and of those only a few managed to keep it (possibly 1 in 5000). It is said that if all the gold that was found (some 4 millions dollars) was divided among everyone that first started the search, each would receive $20.00!
This is not about gold, but the analogies are there.
This is about trading and what it takes to be successful on a consistent basis. I asked Dr. C today if he had a trading plan and he replied: "I am unconscious."
What he means is that after 25 years of options trading he is Unconsciously Competent. I discussed in detail the five levels of Trading Competence in the December Trading Doctor Newsletter, and you can review that here.
Yet Dr. C, even after 25 years, still does it, day after day with remarkable success, always pushing himself to higher and higher levels of mastery. It is not enough to be a multimillionaire. It is not about the money. It is about the continual challenge of dealing with everything that comes to him a way which is as natural as breathing. If stock gets "put" to him, he knows immediately what to do and he does it without thinking. He does not panic or have an attack of high blood pressure or emotional outburst. He just does what he has to do. He has his wife to take care of the bookkeeping for the voluminous number of trades he does every day (20-25) and "I couldn't do it without her." Because of the rapidity with which he trades, he cannot express well exactly what he is doing (Once again, review the levels of Trader Competence and you will see why).
Well, I suppose he could and would if you would spend a long enough period of time with him. I can only tell you that I knew essentially zilch about options before meeting him, and now, I feel pretty comfortable talking about them and understand what he is telling me when he says he is building castles and fortresses around his positions.
Dr. C. is a true master trader options trader, and I am grateful for the opportunity to learn from him and to be able to share this with you.
What about you? How are you doing?
If you are like most people who write to me, you are still struggling to find your place in the markets. You are on the learning curve and are paying your dues.
How long does it take? This is the question most frequently asked. The answer is: in my experience, it takes 10 years and 10-20,000 hours of practice before I would feel comfortable turning any trader lose without assistance in the shark tank. And it is quite a complex shark tank these days because the sharks are getting more and more cunning. Complex algorithms, neural nets and many types of computer assisted trading are in vogue. Yes, you say, but human beings program all these computers so there is always going to be human error. Yes and No. Why No? There are new hedge funds cropping up which put millions of market algorithms into computers and "allow the computer to sort out which work and which don't!" Please don't ask me how this is done, since I do not know. I only know that the waters are becoming more and more treacherous for the "little guy or gal" (I am one of them!) and the sharks are more and more hungry.
Deception in the markets is rampant and anyone who tells you that you deal with market conditions the way you deal with real life success is not being honest. Yes- there is a real correlation between the way you conduct your life and the way you trade, but this has to do with state of mind. Peace of mind and the learned ability to respond, rather than react when you see something which is unfamiliar or threatening (like a huge market move against your position).
Success in "real life" has little if anything to do with success in the markets. This is why so many highly educated and highly trained individuals fail as traders. Trading is a profession unlike any other since losing is winning. LOSING IS WINNING.
How can I say something like that? What does that mean? How successful would you be as an attorney if you came home a couple of nights a week and announced to your wife that you lost another case today, and that you had lost three of your five cases this month? What about a medical doctor? How successful would you be if you had to deal with losing three patients in five surgeries? You see, real life standards by which success is measured are not applicable in the markets. Do you understand that? Do you see why so many people with enormous success and great careers simply fail miserably as traders?
To others, being wrong is a source of shame; to me, recognizing my mistakes is a source of pride. Once we realize that imperfect understanding is the human condition, there is no shame in being wrong, only in failing to correct our mistakes... George Soros
The most successful traders know how to take small losses and manage risk. It is impossible to trade without taking losses. Impossible. You are a success when you learn to MANAGE RISK through position sizing and limiting losses. In life, we do exactly the opposite. It is somehow virtuous or noble to hold onto losing people, places and things. We get "stuck" in the commonplace and everyday such that we don't want to "hurt" other people or we don't want to make a change, since change is perceived by the ego as death. Things are just fine the way they are.
Do you know what it means when you say you are F I N E? Well, the first word cannot be written, but it rhymes with Mucked Up. The I = Insecure; the N = neurotic; and the E = Emotionally Unstable. Now, how many of you are F I N E? How is your life working for you when you keep doing the same thing over and over again with the same people over and over again and expecting different results?
Do that in the markets, and the sharks will devour you. They are waiting for you. Markets are not nice. They are mean and cruel and that is the way it is. YOU ARE TRADING YOUR BELIEFS AGAINST THE BELIEFS OF OTHER TRADERS. With the millions of people trading against you, how many degrees of strategic thinking do you need to use in order to determine what the other person is going to do? Call in A Beautiful Mind to tell you about iterated dominance and every other aspect of game theory because that is what you are dealing with in the realm of strategic thinking.
You are trading your beliefs against the beliefs of millions of other traders and you are buy and selling RISK!
What do you think happens to the money you lose? Does it just disappear into the great market abyss? Where does it go?
Where do you think the money comes from that you win? How does it appear magically in your P/L?
Think about how powerful and dangerous a game you are choosing to play, especially because you don't know who is taking your money and you don't know where the money you are getting is coming from. Is there any situation in your "extra-market" life that compares with this? If so, please drop me a line and let me know?
This is war and you chose to enter it. So, if you do, come prepared for the battle of your life. This is the biggest battlefield on the planet. Welcome to the great game of money!
Any player unaware of the fool in the market probably is the fool in the market... Warren Buffett
Until Next Time,
Good Trading and Brain On!
Janice Dorn, M.D., Ph.D.
www.thetradingdoctor.com
This article is copyright
Source:
http://www.articlealley.com
Americas Watchdog Applauds American Interbanc for Calling Attention to Mortgage Bait and Switch Schemes Used by Some of the Largest Lenders in the U.S.