This posting was recently brought to my attention. It originates from an international trading site and is repeated here verbatim. Trader John lists in point form the 38 steps it has taken him to become a successful and profitable trader. I think this is a very pertinent article as it outlines in a simple yet powerful document the journey that is familiar to all of us as we seek to become unconsciously competent in our trading and active investing activities.
Reading through Trader John’s points you will no doubt recognise that you have experienced some, if not all of his events and feelings in your own trading journey. It may also provide you with an opportunity to reflect on where you are on your journey and the many milestones you have reached and passed.
What is also very important to most of us is the realisation that ALL those who set out on this journey experience very similar feelings, emotions and actions at some stage. So, next time you are feeling stuck, have a series of losing trades, or are just feeling frustrated with the markets and your own perceived lack of progress, have another read through these 38 points. Identify which point you are at and make the decision to overcome and rise above the situation and keep progressing forward. After all, trading and investing, like all things in life, is a journey, not a destination. Our resolve and skill will continue to be tested – each test is an opportunity to grow and improve.
1. We accumulate information – buying books, going to seminars and researching.
2. We begin to trade with our ‘new’ knowledge.
3. We consistently ‘donate’ and then realise we may need more knowledge or information.
4. We accumulate more information.
5. We switch the commodities we are currently following.
6. We go back into the market and trade with our ‘updated’ knowledge.
7. We get ‘beat up’ again and begin to lose some of our confidence. Fear starts setting in.
8. We start to listen to ‘outside news’ and to other traders.
9. We go back into the market and continue to ‘donate’.
10. We switch commodities again.
11. We search for more information.
12. We go back into the market and start to see a little progress.
13. We get ‘over-confident’ and the market humbles us.
14. We start to understand that trading successfully is going to take more time and more knowledge than we anticipated. MOST PEOPLE WILL GIVE UP AT THIS POINT, AS THEY REALISE WORK IS INVOLVED.
15. We get serious and start concentrating on learning a ‘real’ methodology.
16. We trade our methodology with some success, but realise that something is missing.
17. We begin to understand the need for having rules to apply our methodology.
18. We take a sabbatical from trading to develop and research our trading rules.
19. We start trading again, this time with rules and find some success, but over all we still hesitate when it comes time to execute.
20. We add, subtract and modify rules as we see a need to be more proficient with our rules.
21. We feel we are very close to crossing that threshold of successful trading.
22. We start to take responsibility for our trading results as we understand that our success is in us, not the methodology.
23. We continue to trade and become more proficient with our methodology and our rules.
24. As we trade we still have a tendency to violate our rules and our results are still erratic.
25. We know we are close.
26. We go back and research our rules.
27. We build the confidence in our rules and go back into the market and trade.
28. Our trading results are getting better, but we are still hesitating in executing our rules.
29. We now see the importance of following our rules as we see the results of our trades when we don’t follow the rules.
30. We begin to see that our lack of success is within us (a lack of discipline in following the rules because of some kind of fear) and we begin to work on knowing ourselves better.
31. We continue to trade and the market teaches us more and more about ourselves.
32. We master our methodology and our trading rules.
33. We begin to consistently make money.
34. We get a little over-confident and the market humbles us.
35. We continue to learn our lessons.
36. We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and our trading account continues to grow as we increase our contract size.
37. We are making more money than we ever dreamed possible.
38. We go on with our lives and accomplish many of the goals we had always dreamed of.
As an advocate of using a mechanical approach to trading and investing, it is point 36 that I find the most important. It is at this point that we finally realise that this whole caper is not about us, our ego and our need to be right and to control. It is about overcoming fears through empathy and trust which are manifested through surrendering to the rules of a systematic process with a researched and proven ‘edge’ over the market. Accept and achieve this and points 37 and 38 will follow, almost magically.
As always, I wish you consistent and objective trading.
10 Responses
Loris – I think the answer you are looking for can be found at Step One !
I think the stock market is about to test our conviction and our rules again,when we give back much of the profit accumulated in the past 6 months or so.
Great post Gary – Ten years plus ago I was asking the same question as Loris asks today. At that time I was fortunate to stumble across Sharefinder. Team Sharefinder provided the rules, advice and encouragement along the way – and “that has made all the difference”.
I’m an old Sharefinder customer and although the Principles of: “The five fundamental truths” and “I am a consistent winner because:” that Gary taught us years ago, are still clearly visible above my computer screen; I have to admit that my trading journey to date has been similar to john.
My occasional wild style of trading was fun but very expensive! I have been humbled by the market and have donated many times for not following SPA’s rules.
Why? I guess I am what I am, someone who needed to learn the hard way.
I am at point 36 now. I’ve restarted a pure SPA3 portfolio with no “Noise” just SPA3 signals and money management rules. Boring, quiet and strangely free.
Great posting Gary.
Gerald Loeb, after a long and successful career on Wall Street as a broker, was asked by a young reporter: “What’s the secret of successful investing in the stock market? Loeb said, “Son, if you have 40 seconds to spare, I’ll tell you – BUY LOW and SELL HIGH! However, if you have 40 YEARS, you will eventually learn how to BUY LOW and SELL HIGH!”
I prefer to use the analogy of surfing, even though I have only tried it 3 times, fallen off and have given up. Surfing is really simple – you paddle out on a board, wait, catch a wave, stand up and try to maintain your balance during the ride. No moving parts, no motors, just wave power and you balancing on the board. Beginners tend to practice on small waves and in the shallows. When they become more confident, they begin to tackle bigger breaks.
The bigger waves tend to break over jagged coral and falling off your board can result in some very nasty wounds. Many surfers give up at this point after a few falls and hurting themselves, despite having spent a lot of money on customised boards, etc. Yes, surfing (like trading) may be simple but it’s not easy to master. I have watched surfers waitng for a wave. When one comes along, some will get onto it and ride all the way to the beach; some will start too late and flounder, some will fall off along the way and the rest will remain sitting in their original positions, allowing the wave to roll from under them and “NEVER GOT OFF THEIR BOARDS”.
Like the market, the ocean does not care whether you have a great ride or fall off – it does not even know that you exist. It will keep on doing what it’s going to do, with or without you. With a lot of practice, a lot of falls, you eventually (so I was told!) get good at it, but you’ll never master it completely.
All you surfers out there – please pardon my simplification of your tremendous sport. I don’t even know the correct terminology. I’m taking investing lessons from Gary – perhaps someone would care to teach me how to surf someday!
Thanks Gary, I am a new SPA student, I started,because I felt I needed to be responsible for what happens to my Super,I am already at 36 in a few weeks,thanks for encouraging me to just relax and enjoy the journey, to leave time for what I really love with a passion,painting.
Response to Comments by Patrick and Wills:
“Son, if you have 40 seconds to spare, I’ll tell you – BUY LOW and SELL HIGH! However, if you have 40 YEARS, you will eventually learn how to BUY LOW and SELL HIGH!”
While driving out to the airport yesterday I listened to part a recording of Mark Douglas’s Path to Consistency workshop that I keep in my car and listen to when in the car alone. He held one of these workshops in Melbourne in 2004 which ShareFinder hosted.
Wrt to this posting here’s the bottom line, roughly quoting Mark off the top of my head:
“Even if you have the desire to do something and you are aware of how to do it at the conscious level [through reading, training, seminars, blogs or whatever] it does not mean that you will actually be able to do it in the heat of the moment.
This is so because all or some of our existing beliefs [it only needs one highly energised dysfunctional belief] at the subconscious level are not aligned with the object of our desire and awareness. The misaligned belief(s) will demand expression and hence sabotage the object of our desire and awareness.”
The solution is to work with your beliefs to de-energise the dysfunctional ones that relate to the object of your desire and awareness, which, in the case of this discussion Blog, is successful trading. This is discussed briefly in Chapter 12 of the SPA3 Reference Manual.
If traders don’t find a process to step into to transition from conscious desire & awareness to subconscious execution they may well take 40 years to get “it”!! Mechanical trading is one, or maybe the only, way of speeding up the process. However, the eventual determination of whether a particular person makes it as a trader or not, is how dysfunctional their current beliefs are and what they do about changing them; not any system, knowledge or coaching in itself. The system (knowledge, coaching etc), IMHO, is absolutely necessary to stand a chance but not the determinating factor.
Wills, excellent analogy with surfiing.
Patrick, well done for keeping the Five Fundamental Truths alongside your computer. Contiue to read and recite them, aloud, daily.
Regards
Gary
I have just invested in sharefinder and it seems the more you read you realize everyone seems to make the same journey through share trading and the ones that dont make the same mistakes bail out and no matter what you read or invest in the one answer is the same cut your losses and let your profits run!!!
Thank you Gary for developing this product. If not for this I would have still at step 13. After 4 months I am at step 36. It suits my lifestyle very much. The down side is that I have not read the fin review for 4 months.
Great.
Where do I find trading rules ?
Loris