Like a Kung-fu master, the trading master uses a growth journey to go from beginner to fearsome expert.
Trading in financial markets is so popular precisely because success translates to extreme rewards. One example, Richard Dennis (featured in the book, Market Wizards) transformed his initial grubstake of $10,000 into a multi-million dollar fortune. Locally, stories of traders who parlay small initial sums into vast wealth spring up with regularity in blogs, newspapers and by word of mouth.
Millions worldwide are trying their luck in the financial markets every day, planning and strategising in their quest to grow wealth. And every day, thousands of new traders begin a lifelong journey to become expert traders. Not all will succeed, but why?
Many believe that successful traders are talented analysts by birth, but Dr. Brett Steenbarger, author of Enhancing Trader Performance, proposed that trading skills, and therefore a winning mentality, is learnt. According to Steenbarger, trading is a performance activity. And much like martial arts, the path from novice to expert follows the same set of guiding principles.
1. Create a trading dream and believe in it
Like how an aspiring martial artist begins with a dream or an idol (say, Bruce Lee), the novice trader begins with a clear trading dream, which can be inspired by stories of others’ success. This dream is then translated into personal visions and goals that act as signposts of achievement, and a source of encouragement in the face of obstacles, losses and setbacks. Visions and goals also become a guiding force when deciding which trading action to take.
2. Use a Probability Mindset to achieve success
Most traders believe that money can be made from financial markets. Successful traders believe that they are the ones who will make money from financial markets. In addition, they use the a probability mindset when thinking about trading. By evaluating each trade through the lens of probabilities, they know when the odds favor a particular trading action, and only act when the odds of success are in their favor. They also accept that both gains and losses are part and parcel of trading, and make efforts to limit the magnitude of losses as a way to enhance their trading longevity.
3. With effort, turn the dream into reality
Like many martial arts movies, our novice t now realises he does not have the necessary skills to achieve his dream, and joins a martial arts school to acquire knowledge and techniques. His initial attempts are uncoordinated and clumsy, but he perseveres despite the difficulties, driven by his dream. As he continues to practice, his skill levels improve, and his movements become smoother. The now-competent martial artist continues to upgrade his knowledge and skills and over time becomes an expert.
Similarly, the novice trader gains knowledge and trading techniques through committing his effort, energy and resources in his pursuit of trading success on topics such as market understanding, high probability trade set-ups, and opportunities and skills for online trading.
His initial trading attempts may be unsophisticated, and he will certainly encounter some losses. As he continues trading, his trades become smoother and he begins to accumulate some wealth. He gains a strong understanding of market behavior. With consistent efforts to improve his knowledge and skills, he becomes a better trader and grows closer to realizing his dream.
The key difference between those who achieve their trading dreams and those who do not is the amount of effort put in to achieving their goals. Successful traders often embark on a concerted education program that provides a solid framework for them to achieve their goals, while those who fail do no more than try their luck. Crucially, successful traders also have positive beliefs that that they deserve success because of the effort they have exerted in learning and improving their trading skill sets.
Are you a novice trader looking for success? Do you agree with this article? Let us know in the comments.
About the Author
Jeffery Tie lectures on Trading for AB Maximus & Co. He was previously from Refco Singapore and CMC markets. He is also a registered instructor with the International Shinkendo Federation and previously wrote a 3-part article on the similarities between the philosophies of Martial Arts and Trading for Chartpoint Magazine.