4 Hidden Gems I Love About Trading
Contrary to popular belief, it’s actually not all about the Benjamin’s
Since becoming fully invested in my trading career over two years ago, I’ve stumbled across some pleasant surprises that from the outside looking in were not so apparent. I understand how in today’s epicurean world why trading is so appealing: there are low barriers to entry, minimal effort is required to transact and there is the very real possibility for immediate gratification and untold riches. One could be armed with nothing but a smartphone and be well on their way. It certainly has the packaging of a ‘get rich quick’ activity, but like a wolf in sheep’s clothing, it will lure in the unsuspecting victim by granting some early success, only to turn on them and have them running for the hills.
Personal finance has always been a big interest of mine and once I had gone down the trading rabbit hole, I was surprised by the multifaceted challenge it offers to all those who are bold enough and choose to accept the mission. Here are just 4 of my favourites.
1. It Creates a Level Playing Field
“To the market, you are an anonymous number. It does not know nor does it give a flying one about your race, gender, age, background, previous successes or whether you are hot or not.”
When it’s just you, the charts and your thoughts, all of a sudden you realise that there is nothing holding you back from success. Sorry, let me rephrase that, there is nothing external holding you back from success. To the market, you are an anonymous number. It does not know nor does it give a flying one about your race, gender, age, background (clean or unscrupulous), previous successes, or whether you are hot or not. You are now just another faceless player interacting within this 3-D global chessboard. This means every excuse that you’ve ever firmly held on to or used as a justification as to why you haven’t achieved those goals is now null and void! Poof. Gone.
Common alibis I’ve heard all too frequently are, “it’s because I’m black” or “it’s because I’m a woman” or “it’s because I’m too young (or too old).” Sorry, they just don’t work here. Excuses are not accepted as deposits. Unfortunately, the sad thing is that some of the foregoing statements might be true as to why you have run head first into barriers in life. It is a matter of fact that inequality remains in society. People continue to be discriminated against which can seriously stunt an individual's growth. Even so, anyone who allows those excuses to become a playing card in their deck of reasons as to why, “I haven’t,” “I couldn’t” or “I didn’t,” is only hurting themselves.
On the flip side, nobody can use their pleasing personality to charm their way to success in the market or become buddies with the bosses. Manipulating the market environment is not possible unless you control hundreds of millions or even billions of dollars. I find this to be hugely empowering because now more so than ever before, the only place I can look to for answers is in the mirror. That can be tough at times but I much prefer it this way, makes life simpler.
2. Here, You Make Your Own Rules
From the moment we arrive in this world, we start living by a set of rules. The only thing that changes is the authority that administers them whether that be parents at home, teachers at school, managers at work, or the government in life. For the record, my parents and previous managers have always been pretty great. Whatever stage of life, there seems to always be a framework for us to abide by which isn’t always a bad thing. In fact, it can be quite necessary in order to guide us and keep us on the right track. Generally speaking, it’s usually the children that have zero to no boundaries growing up that end up with more serious problems later in life. At the opposite end of the scale, when the rules become too authoritarian, you eventually get rebellion… or a mid-life crisis.
You see with trading there are 3 main rules; buy, sell or stay out. That’s it. Everything else is up for discussion. Make no mistake about it, this type of environment creates the potential for people to cause themselves real emotional and psychological harm not to mention inflicting serious damage on their bank account. However, if you genuinely approach trading in the same manner you would any other business or career endeavour, the next to no rules situation suddenly gives you an incredible platform to build off.
“It’s more difficult to be a loser in a game you set up yourself.” ~ Nassim Nicholas Taleb
Having the discipline and patience to define and master a set of rules from the infinite possibilities that exist is another story for another day.
3. There Is No Ceiling…No, Really, There Isn’t One
Even if I tried, I couldn’t recall how many job opportunities I’ve come across that claim, “there’s no limit to where you can go with this role.” There nearly always is a limit or a ‘ceiling’ though.
“Compound interest is the 8th wonder of the world. He who understands it, earns it, he who doesn’t, pays it.” ~ Albert Einstein
Care to hazard a guess as to which side of this equation 99% of folks are sitting on? Here’s a clue, in the UK the average debt per adult is £31,845 and rising. Einstein is one of the smartest people that’s ever lived, so I reckon his words should be heeded.
When I really understood compound interest and am able to watch it in action, I started to think differently, not only about money but about life in general. When you trade in the right way, you begin to shift very quickly to the side of the equation where compound interest starts to work in your favour. Granted this takes time and a whole lot more patience, but for those of you who are familiar with Malcolm Gladwell’s book, ‘The Tipping Point’, you’ll understand that a trickle can quickly turn into a flood once the proverbial damn breaks. It’s at this point where the object in motion stays in motion.
One of my mentors often uses his favoured bamboo analogy. When you plant bamboo, you can water and nurture it for weeks and months on end without much visible progression, if any at all. To the naked eye, nothing is happening. Then all of sudden it reaches that magic point and can start growing at a rate of up 3 feet per day! While compound interest is generally referred to in a financial context, once you transfer this line of thinking into other areas of life whether that’s your relationships or developing a new skill, it’ll work wonders. It’s the same thing that breeds ‘overnight successes’. Our brains are not wired to understand exponential growth, we cope better working on linear scales. Really getting to grips with this can give you the much needed will to persevere when there is little in the way of tangible evidence of progression.
There is, however, a more important consideration to the idea of having no ceiling, bringing me to my fourth and final point.
4. Trading is a Journey of Continual Growth
“…80% of trading is about how you think and how you handle your emotions”
I’m sure you’ve heard of the phrase, “it’s not what you get, it’s who you become in the process”. This could not be a more fitting statement when it comes to trading. When I began, I thought that success in this game was synonymous with possessing the skill of amazing technical analysis which is the ability to read and interpret financial data charts. That’s about 20% true. Don’t get me wrong, you do have to have great technical or fundamental skill or both but beyond that, 80% of trading is about how you think and how you handle your emotions. We, humans, are strangely touchy when it comes to money. To develop the discipline to manage yourself puts a whole different spin on this journey.
The market is pretty much designed to expose our cognitive bias’ and take money from the emotional, irrational people aka the masses and move it into the accounts of the unemotional, rational people aka the smart money (institutions). Essentially, the latter group knows exactly how the average Joe or Jo thinks and feels when it comes to investing and therefore knows in advance the mistakes they will make before they make them. It’s about mass psychology.
OK, how does this tie in to continuous self-development?
It’s becoming widely accepted that a high-level EQ (emotional intelligence) will do more for your professional life than a high IQ will. I believe this to be true from observation and personal experience. However, having a high EQ doesn’t always mean in relation to other people, it also means understanding ones-self. The oldest admonition is, “Man know thyself.” Self-awareness is very near the top of the list of attributes required for success in all areas of life. As we constantly move forward through time, we are all life long learners whether we like it or not. It’s in choosing to become an intentional student where the power lies.
It turns out that the gap between being one of the masses on the losing side of the trading game, to being one of the top 1% who can make money from the market consistently is filled by learning more about yourself. Crazy right. I never would have thought that when I started out but I can testify it’s true. Activities such as reading books, studying successful people in finance and business, learning from mentors, and becoming acutely aware of my inner dialogue and feelings throughout the day have all contributed to my progress.
The market is a transient place. Participants constantly come and go thus forming an ever-developing entity recording the mass progress of man. Therefore the number one skill that the top traders possess is the ability to adapt. Adapt or die. Evolving in this sense necessitates becoming a perpetual student of the game which also means being a student of yourself.
While these few concepts have resonated with me on my trading journey, I hope there are ideas that can be applied to whatever it is you are pursuing in life.
Thanks for reading.
