I hope you had an enjoyable (and DIY free) bank holiday weekend.
Inspired by Britain’s Olympic cyclists, Mrs Market Maven and I took the train to Windsor then cycled the 25 miles back home along the Thames. Even without sunshine, it was an enjoyable day out, though it was clear that we were not in Olympic condition. I’m sure Chris Hoy doesn’t have to contend with nettles, errant dogs and my map reading.
On our return, we watched the home coming for the British Olympians. I was struck by how down to earth they all were. These guys had trained intensively for four years to get there and had performed on the day. Truly inspirational!
It made me think about my trading and the effort I put into my trader training – resulting in advice that we all should implement.
Apply this to your trading – advice and lessons from Olympians
I think many of us are attracted to trading by the dream of fast cash and easy money, but the reality is that hard work is required to get it right in the long run. I’m not saying it’s an Olympic challenge, but perhaps we all have to be prepared to put in the hard work.
Chris Hoy, triple Olympic gold medallist said that he didn’t miss a single training session due to the fear that he would miss out on gold by the one hundredth of a second he might gain by training on that day.
Now that’s dedication!
It’s debateable whether one training session could provide that extra boost, but think about the mental edge it would provide. Hoy was able to go into those finals knowing that he had prepared as well has he possibly could.
Sir Steve Redgrave wrote a neat little book on winning called You Can Win at Life. It was meant to be a self help book with insights from his sporting achievements. Redgrave kind of gives up on the self help angle half way through and focuses on sports, but it’s still a useful read full of great pointers and anecdotes.
In the book, Redgrave talks about planning to train on Christmas day. This wasn’t necessarily because of the extra boost you’d get from your training, but because of the mental edge it would create. Us aspiring traders, just like athletes are hampered by our emotions. We too can ‘choke’ at vital moments. Fear and anxiety creep in when we are unsure of a position.
Confidence breeds confidence and above all success.
I’ve seen Alan Rich from www.tradethemarkets.com trade live and it’s an amazing thing to watch. The biggest thing I noticed was his supreme confidence. There was no hesitation in entering trades, and even when it went wrong there was no recriminations or blame.
Alan wasn’t born a trader, just as Redgrave wasn’t born a gold medallist in the rowing (Redgrave started off in other sports). Like an athlete, he had to learn his trade. Alan probably won’t mind me explaining that in fact, he was hindered in his early adult life by a brain injury that virtually wiped out his short term memory. He literally had to re-learn how to remember. He did this and then threw himself in at the deep end of a City firm where he put an extra effort into his training.
There appear to be some clear lessons from the Olympics that we can all apply to our trading.
1. Set Goals
There’s an infamous study conducted on US college students on goal setting. They asked students if they had set goals for the future, just 10% had. When they checked back on them years later, those 10% were worth more than the 90% who hadn’t combined.
Setting trading goals focuses the mind and provides targets to aim for. Goals have to be realistic though, you are not going to be a millionaire next week based on a starting account of £100. At the same time they have to be challenging though. Start with the end point in your mind and break it down into achievable chunks or milestones. Once one milestone is achieved move on to the next one. Try to be specific as possible.
Here’s some achievable goals you might want to apply to your trading (Add your own timescales)
– Make a profit.
– Beat your bank account interest rate over a year
– Beat the FTSE over a year.
– Make X amount of profit.
– Pay your tax bill with your trading earnings.
– Buy X with your trading profits.
– Earn a quarter/ half/ three quarters/ all of your existing salary from trading profits.
Breaking the goals down into achievable milestones makes the goal of trading for a living or part time income more achievable. There’s a great example of this in the book by Sir Steve Redgrave. The lesson would be a lot better if I could remember the full details, having just leant the book to a friend, but it’s still a good story.
A US swimmer was disappointed with this performance at the previous Olympics. He was well off the pace. He sat down and looked at his previous best times, he looked at the times of the winners and how much they improve at each Olympics. I figured out he needed to improve his best time by four seconds in order to win the Olympic gold in his event. At that time four seconds was a huge amount of time at his event.
Instead of panicking at the size of the mountain he had to climb, he broke it down into small chunks. So he set his challenge of shaving 1 second off his time each year for the next four years. 1 second a year is a lot less daunting than 4 seconds.
Just like in trading, £1,000 is a lot less daunting than £4,000.
The swimmer hit his target in every year of his training and won Gold at the Olympics.
2. Plan to succeed.
If your goal is what you are going to do, your plan is how you are going to do it. In trading this might be specifying how long you will spend finding a market you like to trade, then how long each day you will spend researching that market. Then specifics like what sort of set ups you’ll take and the money management.
Planning in trading has two elements; the big plan as mentioned above and scenario planning.
I’ll admit, I’m not a natural planner, but I do it when I see it is necessary. Life does get in the way, but it is better to have a plan you need to adapt than no plan at all.
Scenario planning is a powerful tool to apply to your trading.
Sir Steve Redgrave spoke about playing ‘what if?’ games with his team and coach.
What if the German’s go out strong?
What if the weather is bad?
If any of the above happens, the team were able to put in place the plan they had worked out and react quicker than the opposition.
In trading the worse you can do is open a trade and hope. The best traders know what they are going to do before they open the trade. They don’t know what the market will do, but they know how they will react.
I did a psychology degree and trained as a psychotherapists, yet I’m still like a monkey chasing a banana in my trades if I don’t plan in advance. So have a think about your trading scenarios, for example “If I’m 10 pips up I’ll move my stop to break even”. “If I’m down 30 pips I’ll cut my losses”.
3. Practice, practice, practice
Trading is tough and is made ever tougher by the fact that occasionally the goals posts change. I used to follow a service that was super, it doubled my futures account in less than a year. Then it suddenly stopped working, the reason? Market conditions changed and the proprietor was unable to adapt.
The best traders get there because they practice and continually hone their skills. It’s not about overnight success, but about all the research, paper trading and small stakes trading finally clicking.
There’s some interesting research from Brett Steenbarger (http://traderfeed.blogspot.com) on the development of expertise. Whether it be chess or trading, experts develop mental short cuts that allow them to act instantly when they spot certain patterns, the only way they can do this is through practice that allows them to develop these little short cuts.
There are even some theories that the performance of Tiger Woods isn’t down to natural ability, but to deliberate practice. I’m not sure if you can entirely rule out genetics, but the benefits of deliberate practice cannot be ignored.
Here’s some useful articles on the subject of expertise and deliberate practice:
So here’s to a few Personal Best’s from Market Maven readers achieving our personal goals.
My EUR/ JPY short hit the trailing stop for a 3.2% profit last week. Bit galling to see it carry on going down, but still, can’t complain. Yesterday I took a long on the USD/ JPY from 109.54. Currently up a few pips. I see the Dollar is incredibly strong today.
Unfortunately, I’ve no further trades on this currency other than the test trades with Currency Options Insider. Interesting the Wizard has had the long term trend for the Dollar as being up for the whole of August. The Euro is getting hammered as is the Yen. FX53 took another short on the GBP/ JPY from 206.17 and boy is that working out well.
I’ve no trades on the EUR/ GBP, but I’m willing that down like nobody’s business. I’m off to Lake Como in a few week and would like not to wince at my hotel bill as I did the last time I came back from the Eurozone.
Some good and some bad trades on the ORB, unfortunately not had chance to update on this morning’s FTSE trade, but will do late. Last night’s S&P 500 trade was a peach.
This week’s hot trading buttons
This afternoon we’ve got US Consumer confidence figures and new home sales data. Later this evening, we have the release of the FOMC meeting minutes and traders will be keen to examine the voting patterns as an indicator of future policy. US Core durable goods data follows on Wednesday afternoon and US GDP figures On Thursday is the last heavy economic announcement of note for the week.
“1) Before you put your capital at risk, have a well-formed trade idea;
2) When your idea pays you out quickly, take some profits;
3) Don’t get caught up in individual trades; focus on profitability over a series of trades and days..” Dr Brett Steenbarger