I’m reading the excellent book Outliers by Gladwell, it’s a fascinating analysis of success and how it happens, interwoven with biographies, history, psychology, science and social research. Some of the most interesting and engaging topics to read about. Reading the paragraph below just now made a lot of sense to me, especially after I was talking to a friend yesterday over some beers and German food. And ended up “complaining” to him that I find it difficult to detach myself from the markets and the research and projects I’m involved in. I tend to only do that when I’m on vacation. This wasn’t always the case. Back when I was working for the man, from 6pm and on weekends I couldn’t care less about work. The following snipet from the story about the Borgenicht, a poor Jewish immigrant family arriving in New York in the turn of the previous century pretty much explains why.

When Borgenicht came home at night to his children, he may have been tired and poor and overwhelmed, but he was alive. He was his own boss. He was responsible for his own decisions and direction. His work was complex: it engaged his mind and imagination. And in his work, there was a relationship between effort and reward: the longer he and Regina stayed up at night sewing aprons, the more money they made the next day on the streets.
Those three things — autonomy, complexity, and a connection between effort and reward—are, most people agree, the three qualities that work has to have if it is to be satisfying. It is not how much money we make that ultimately makes us happy between nine and five. It’s whether our work fulfills us.

Eventually the Borgenichts’ business they started in their $8 a month apartment with one sewing machine became one of the largest manufacturers of clothing in the US.

This paragraph in the book I’m reading now, Flow: The Psychology of Optimal Experience, grabbed my attention.

Contrary to what we usually believe, moments like these, the best moments in our lives, are not the passive, receptive, relaxing times—although such experiences can also be enjoyable, if we have worked hard to attain them. The best moments usually occur when a person’s body or mind is stretched to its limits in a voluntary effort to accomplish something difficult and worthwhile. Optimal experience is thus something that we make happen.

Some generally good observations made by Ziad in a reproduced comment which can found here:

E-Mini Player: EMini S&P 500 Futures Trading Journal: Learning to Become a Successful Trader

Before I give my 2c on it, it sounds like Ziad is trading index futures. I don’t trade them (yet), I trade stocks. So maybe that accounts for some differences in approach. Also I have no idea who Michael is (no link to the original comment) nor what sort of trading issues he’s facing.

Anyway, the slightly different perspective I wanted to add is that it seems that Ziad is confusing simplicity with “clear cut”. Trading can be simple and ambiguous at the same time. I don’t see a contradiction in that. Anything related to taking on risk with expectations for a future outcome is going to be ambiguous by definition, on any single occurence basis.

As for setup, in my experience locking in on a decent risk:reward “setup” (i.e. pattern) and then building on top of it is a very valid approach. The problems start with people’s expectations, i.e. when people expect the setup to be “it” and all that’s required. This sort of expectation leads to ignoring other important aspects that Ziad mentions and also to frustrations as things don’t work out immediately even when the ’setup’ is executed correctly. This in turn usually leads to changing the setup or replacing it and then repeating this ad infinitum (or ad going bust financially or as is more common, emotionally).

So what would I advise? I would advise someone to just pick a setup, preferrably one you know is traded by someone who is already successful. This is a natural starting point, you can’t trade completely without some definition of a pattern to look for. Then trade it day in and day out . Don’t expect it to work in some magical way like an on/off switched system, instead consider it a starting point, an over-simplification. And then over time, practice, observation of self and market gel it into a trading style that works for you. When does the ’setup’ work, under what conditions, when does it do really well, when should you filter signals out and ignore the setup, etc. etc.

Overall I think every trader can benefit from Ziad’s observations and advice, especially on the learning process of observation, journal keeping, mental state etc. But one just needs to be aware that what works for one person doesn’t always mean is The best/only way to go about things. And yes that covers my advice above as well :-)

- via Andrew.

Nice video on getting from a McJob to being a NASA Engineer working on Hubble. Can’t embed it so go watch it over at youtube.

NASA | Meet a Hubble Engineer: Jackie Townsend

This is just a rant. If you’re looking for actual trading insight, I’m sorry, none will be (intentionally) given. I just need to put it here, at least for posterity’s sake while the thoughts are fresh in my mind.

Anyway, with that ‘intro’ out of the way what I really want to say is: I hate missing / skipping trading days. For any reason. Part of it is because I love what I do, but there’s more to it than that. I think it started back in 2006 or so. I can’t quite put my finger on it but it probably has to do with the understanding of the importance of consistency and specifically the consistency of showing up. Woody Allen’s quote about showing up being 80% of success comes to mind.. (if only :-) ). At any rate, consistency in all areas became almost an obsession, as it should have, I’m 100% behing that, that’s how it needed to be. But maybe, just maybe, I can deviate from it now, or can I?

If you’re wondering why I write about it today, well there’s this party this coming Friday, during market hours, that I want to attend, but it will also mean willingly deciding I will not trade on that day. I will be willingly ‘trading’ trading for social reasons. Willingly, that’s the tough part. It (almost) doesn’t matter that I tell myself that skipping one day out of tens of thousands isn’t going to matter, and that there are other things in life which *gasp* may be more important than ___________ (take your pick: work / trading / lifestyle / making or losing money). It’s just hard to break away from habits, particularly those to which you attribute an important contribution to success in a constantly challenging environment.

Finally, as I read through what I wrote above, editing (fixing my grammer and typos) and thinking through it, I think I feel more at ease with skipping. Maybe I just needed to get it out of my “system”. I still need to make sure though that I keep it under control, maybe give myself a fixed number of “off days”, on second thought, nah that will be too corporate :-)

The mind is the root of all our experience, both of ourselves and of others. If we perceive the world in an unclear way, confusion and suffering will arise. It is like someone with defective vision seeing the world as being upside down, or a fearful person finding everything frightening. We may be largely unaware of our ignorance and wrong views, yet at present the mind can be compared to a wild tiger, rampaging through our daily lives. Motivated by desire, hatred and bewilderment this untamed mind blindly pursues what it wants and lashes out at all that stands in its way, with little or no understanding of the way things really are.

Akong Tulku Rinpoche - Taming The Tiger, Tibetan teachings for improving daily life.

There are many great lessons on life in this book, and of course lots of parallels to trading psychology and the mental strength.

Tags: buddhism, learning to trade, lessons, Living, mental, tibetan, trading mindset, trading psychology, zen

I doubt it. There’s an interesting letter from a reader published at TraderFeed. Two things popped up for me, which I disagree with.

TraderFeed: A Trading Performance Insight From Ziad Masri

I remember early last year I’d sit there and watch the market for hours as it moved in a 6 point range with nothing happening. Now it’s almost non-stop action. The effect of all this extra exposure has been accelerated learning.

and he goes on to say:

And from that point of view, there’s never been a better time to learn and grow as a day trader… this market, far from just offering ample opportunity, is offering a crash graduate course.

Well sure there are opportunities to learn, but learn what? I’ve seen many times in the past people trading something that moved like crazy and then when those conditions were gone they crashed and burned. The key point being that abnormal market conditions teach us.. about abnormal market conditions.

I certainly don’t wish this experience on Ziad who sounds like a nice guy. But a reality check is in order. People learning to trade now in this market environment will have, in my opinion, quite a hard time when volatility goes back to normal, which is where it spends the majority of its time, for months and years. This post also reminded me that I’ve heard from a number of friends recently who got really interested in trading all of a sudden, the scoup? They managed to catch and ride a couple of shorts in the financials and now they feel like market geniuses. Profits are nice, but starting out in this environment and with outsized winners means their learning curve is only just beginning. Whether they make it or not and adapt and thrive in more “normal” stock market conditions, only time will tell.

Tags: learning to trade, stock market conditions, trader development, trading