Buffet’s Circle Of Competence In Markets

Τhose of you familiar with Warren Buffet’s idea of the “Circle of Competence” will immediately know what I’m talking about. You realize your proficiency, accept it, and don’t rush to the finish line while breaking the mold over and over again. Keeping it simple is never a bad way to go. But there is most certainly a thing as too simple. If you don’t understand the basics of what’s moving price, it is hard to get your head around a .01% day vs a 3% day. If large movements “seem like magic” then its time to study more (Warren Buffet reads appx. 5 hours every day, if that says anything to you)

While it is true that we have close to 100,000,000 articles floating the internet explaining the key differences, or just “advantages”, of one market, strategy or instrument versus the other etc, the vast majority are essentially bullet-point combinations of Wikipedia facts.

As time passes I am never amazed at the amount of misinformation that hits the internet and beyond, so I’ll keep making it a priority to point out value where I see it.

There are huge benefits to taking a back door approach, versus the common “wow, that seems great” first impression so many of us have when introduced to certain ideas/markets. Based on our interests, we acquire significantly more knowledge than others when it comes to certain components of any market. There is a certain level of enthusiasm that allows you to keep going and stay motivated.

I have gone through a number of activities in my life where my motivation drops like a rock because my level of enthusiasm simply isn’t there. Most of you can probably relate. As a result, I acquire less knowledge. When I ultimately get back to work on the task, the results are unsurprisingly sub-par. Trading is once again, no more special than anything else in this sense.

We want to dig our teeth into something with which we know we have a high level of interest and can simply keep us moving. Only then can we tap into the knowledge we need in order to give us the confidence to execute it properly. The best innovations on this planet have come from people who are best described as passionate, thus obsessive, about what they do.

Originally published at www.trading-manifesto.com