Be ready. After 10,000 hours.

After (about) 10,000 hours of watching and listening, charts and information seem to fit in recognizable patterns.  When a pattern resembles a trade opportunity, it demands action without hesitation, according to a repeatable plan.  So, be ready.

Much has been said about the “10,000 hours rule” that Malcom Gladwell popularized in his book “Outliers.”  I’m not arguing on whether he or his readers have oversimplified the process of becoming exceptionally good at a craft.  Or whether intense and consistent practice is only one of many factors in mastering a skill.  I will just say that his basic point applies well to trading: a necessary, but not sufficient ingredient for excellence in trading is a significant amount of time staring at thousands of charts and gathering millions of information sound bites.

One of the worse things that can happen to a trader is that he’s successful on his first few trades.  He will begin to think that the game is easy and that his “gut” is all he needs.  Just like Iverson, he will think his natural skills are sufficient and practice is overrated.  That first imprint will make room for scars before the year is over.  If he’s humble, smart, and lucky, he’s still have some chips to play with and learn to put together a trading plan, practice self-control, and eventually wait to trade only when the plan commands it.

Any trade that is outside of the construct of a trading plan is a step towards long-term ruin.   When the trade is profitable, it reinforces bad habits that will hurt down the road.  When it’s a looser, it depletes the ammunition and it affects one’s confidence, which makes him gun-shy when it’s time to strike.

Lastly, two things:

  • Trading is a learnable craft.  Don’t think you can be successful without practice.  Don’t be the “dentist in Iowa” who thinks he can make money trading stocks between patients.  Put in the time, learn, and eventually it will fall into place.
  • Don’t get discouraged when you loose and don’t have an explanation for it.  When this happens, it simply means that you haven’t mastered your trading plan yet and you have more work to do.  Loosing is not the problem.  That’s part of the game.  It’s not knowing why you lost that shows your craft is still immature.

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