Trading: A Journey, Not a Destination

nkpanjiyar · #1 15th April 2005, 01:33 PM

Recently read a article by Ken Wolff and would like to share with everyone.

Quote:

Whenever anyone comes to me for help in starting a trading career, one of the first things I recommend is organizing a business plan. It provides direction and helps novice traders start off with a systematic approach.

I suggest that new traders put their costs, their goals, and how they intend to achieve those goals, in writing. It's the same approach you'd follow for any other business. They usually come back with a reasonable plan.

Say, for instance, you have $10,000 a month in expenses. To earn that amount you would need to net around 50 cents a day, trading 1,000 shares. So you would start off learning an appropriate trading strategy and build up to that goal. It sounds simple enough, but the problem people quickly run into is that this isn't exactly like any other business, is it?

Trading Without Goals

We live in a very goal-oriented society. Aristotle once said, "Man is a goal-seeking animal. His life only has meaning if he is reaching out and striving for his goals." And I believe it's very important to have goals. They help keep us focused and motivated, giving us a sense of purpose and direction.

But trading is a funny occupation. Many of the same things that create success in other endeavors will cause problems in your trading. And so it is with goals. Trading goals can put you in a mindset that may very well act as a negative force on your trading.

One of the problems with setting trading goals is that too often, the goal is all we can think of. Albert Einstein once said, "The American lives even more for his goals, for the future, than the European. Life for him is always becoming, never being." A lot of people look at this occupation in terms of making money and enjoying the freedom that trading affords, and they don't really have a love of trading for trading's sake. If you fail to enjoy the process of striving toward the goal, it will be difficult to reach that goal.

Another problem is that people always seem to set their trading goals too high. Your goal has to be reasonable for your skill level. Otherwise, you are setting yourself up for a lot of frustration. Trading goals automatically add pressure -- and the higher the goal, the more pressure there is. The more pressure there is, the more emotion you add to your trading. The more emotion you have, the more mistakes you will make.

There is an innate problem with setting up daily trading quotas as a goal. You can't force good trading setups. They either come to you or they don't. We are entirely dependent on what the market offers us. That means some days you will meet your goal, and some days you will not. It is hoped that the good days make up for the bad ones, but you have to come to terms with the inconsistency. If you try to force trades, you will invariably suffer an increase in stops.

cheers,
nkpanjiyar

nkpanjiyar · #2 15th April 2005, 01:35 PM

Continues....

Quote:

Slow and Steady

One thing that helps is making your hero the turtle instead of the hare. I see this time and time again in my trading room. Whenever anyone makes a big, impressive gain, that trader becomes the hero. Everyone tries to then emulate that trader's moves. Meanwhile, someone else who has been steadily racking up one small gain after another goes almost unnoticed, when in reality, the steady, small, consistent trades are adding up to a lot more than the occasional whopper.

Another thing that helps is breaking your goal up into steps. Rather than focusing on achieving that goal of 50 cents a day with 1,000 shares, start with 10 cents, then 20 cents, and build up gradually. Trade small shares to control your risk. Start with 100 shares, build up to 200, then 500, increasing shares only after you have achieved consistent profits. Take it one step at a time, and it might surprise you what you can achieve.

Last year, I took a backpacking trip into a wilderness area in Northern California. I am used to horse-packing, but I had offered to take my contractor on a nice bow-hunting excursion for record class mule deer, so I decided to act as guide and backpack in. I tried my best to keep my pack light, but the gear we needed that time of year during colder weather meant I had to haul 40 pounds.

Now I hadn't been backpacking in almost 40 years. So when I got out of the truck and looked up at the 3,000-foot peak we intended to climb, all I could say was, wow. Looking at our goal up there really put me in a state of despair. I kept looking up at the peak, then at my 40-pound pack, then over at the happy 45-year-old "kid" next to me.

I put the pack on and started off. About 50 feet down the trail, my legs and back started hurting. I must have grunted or something because my friend asked, "Ken, you OK?"

I said, "Sure. I am fine." But what I was really thinking was, "What have I done? I am not going to make this!" It reminded me of what many new traders say to me after two weeks of trying to learn.

So I decided I wasn't going to look at the peak. I resolved to simply look at the trail and take one step at a time. The trip wound up being a "one step at a time" proposition. I was convinced I couldn't climb to the peak, but I could take one more step. And the funny thing is, I made it 12 miles! In fact, I could have kept going, but my friend was pooped out.

So take your eyes off the peak. If you want to reach your trading goals, learn to enjoy the process and simply take your trading one step at a time.

cheers,
nkpanjiyar

sh50 · #3 15th April 2005, 05:48 PM

Interesting, Informative writeup

Only thing is as regards to implementation, proper education is also required as it is in the US. You can't go on learning by trial and error in a field that has a more than 90% failure rate. If there can be hotel management and textile designing courses, there should be proper trading courses.

Trading for the love of trading- everyone is not so lucky. Many ppl have to force themselves to do things they don't like to support thier families.

No matter how excellent the analysis, it only reflects the current situation.It cannot guarantee what happens in the future-"The future is not always an extention of the present"-That is wht TA reflects and that is why trading is a journey not a destination. You have to go where the mkt takes you and make continous adjustments.

Saint · #4 15th April 2005, 06:59 PM

Great Write-up.....thanx,nkpanjiyar!

kodange · #5 16th April 2005, 12:14 PM

Very interesting and informative!!!
I think the main lesson is - SETTING REALISTIC ACHIEVABLE GOALS and developing a trading plan based on them. Hopefully we all will learn from this.
Regards

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