How To Be A Better Trader 08-08-2017
Almost everyone is seeking ways to become better- at something or the other. That is why the Help industry is so big! Self help books abound, websites proliferate, DVDs and courses sell big time, spiritual gurus hold forth, skill developers are all around us etc. Etc. The desire to improve oneself or one’s situation is so strong and widespread that it has spawned an industry worldwide. But running thru all, repeat all, of these help items is the fact that the final determinant is the person himself. For, he is really the one who has to take what is being offered thru these myriad items and DO it! And therein lies the crux of the problem, as we all know it!
Ditto with traders. They too have enough books to help them become better at analysis, be it TA or FA, become better at managing, or better at different styles etc. Etc. Enough help is available thru courses being conducted all over the country and more than enough material is available on the Net. Still, they continue to lose money! In any market, there are three things which are possible at any time and they are- you can make money, you can lose money or you can break even. Ideally, all three possibilities have the same odds. So, if there is 33% of making money in the market, how come the data shows that more than 90% of the people lose money? Obviously something else is going wrong here and that something is changing the normal odds too!
The biggest culprit, it has been found, is too much activity. Remember a blog I wrote a while ago about how Fidelity said that the most profitable accounts in their schemes belonged to those that were dead? And the second best was for those that had forgotten that they had an account running with Fidelity! Those were the accounts with least activity. Similarly, Warren Buffet says that buy stocks such that if the market shuts down for the next ten years, you still wont be bothered. In essence he is asking you to eschew activity. Motilal Oswal ad jingle says Buy Right Sit Tight. Once again, exhorting you do less.
Trading, by definition, is more activity! So, are traders doomed, never to make profits? But that’s not true. There is tremendous money to be made in trading as well. So what’s the way out? How does one remain a trader (i.e. heightened activity) but at the same time make enough money? A simile given by Sadguru Jaggy Vasudev in another context is worth quoting here. He says that the difference (at genetic level) between a Chimpanzee and a human being is only 1.27%. Describing a monkey he explains that the two main qualities of a monkey are unnecessary activity and mimicking of others (which is probably why the phrase ‘stop monkeying around’). If you link this to trading, we find that most traders are being like monkeys. They have too much activity and most of them lack knowledge, so they simply mimic or ape others, in the belief that the others know what they are doing! Small wonder then that the results are also monkey like!
As Sadguru adds, what differentiates us from monkeys is our intellect. And as a human being, it is our responsibility to, first, not to dull our intellect in any manner and two, to sharpen it. So the way to become a better trader is to use this intellect to reduce the activity in an area that is inherently more active! And that can be done by having a proper structured or methodical approach. By this one can refrain from doing all kinds of things that may not be productive. So, the idea here is to eliminate unnecessary action. Second, once you have your own structured approach, there is no longer any need to imitate others. Most people in the market really do not know what to do next, so anyway, what is the use of copying them? As you deploy your methods more and more, your intellect gets sharper and sharper about it and its usage. And as activity drops off, the flood of conflicting thoughts will recede, the process takes over the actions and guides you to productive and useful actions. You are thus enabled to make money as a trader.
This is far from the imagined version of a trader who just trades from his gut or off the screen or based on his network and leaps from trade to trade, killing it everytime. It is far from the romantic version of a thrilling ride in the market and instead it becomes a boring exercise of concentration, identification and timely actions. The sooner one realises this aspect the faster one will evolve as a trader.