10 August 2020

How To Become The Trader That You Say You Want To Be



I’m a professional trader.

Well, I am now.

It still feels a bit weird to say, but it's true.

15 years ago, I was an institutional, international equities broker at a major Wall Street investment bank. Which, unfortunately, meant that I was sitting in a declining business. You don’t believe me? That’s ok… it IS somewhat unbelievable. Allow me to explain a bit.

When I first went to Wall Street for a summer internship in the summer of 1997 [no age comments please]...many customers still paid 6 cents per share to trade stocks on an agency basis… in international anyway. Agency means the broker just executes the trade without exposing any of its own capital to “facilitate” the trade. That means if a customer bought or sold 1,000,000 shares of Nokia back then, the commission cost to the customer was $60,000… which went straight to the broker’s bottom line.



When I joined the international desk as a full-time associate in 1998, that commission number had already fallen to 5 cents… or $50,000 to the broker for the same trade. That’s a 16.67% decline in revenue… for the exact same business transaction. The only way to mitigate a fall of that magnitude is to substantially increase the number of shares being traded. In the case mentioned, that meant a size increase from 1,000,000 shares to 1,200,000 to make the same money… which wasn’t exactly a cakewalk.

It got worse from there.

By the time I left to become an independent proprietary trader in 2005, my biggest customers [and i covered some of the largest in the firm] were consistently paying less than 1 cent per share to trade. So, using that same trade in Nokia, at 1 penny per share, the customer was paying $10,000… or an 83% fall from 1997 rates. This, of course, also meant revenue had fallen about that much because I promise you volume had not increased enough to offset the fall in commissions.

How would you like to have that as a business?

Yeah… pretty much what I thought.

At any rate, I saw it coming… “so I kept on stomping” right off the street. Over the past 15 years, I’ve built myself into a high performing (meaning profitable) professional trader—on my own terms.

I’ve lost and made millions of dollars trading a variety of markets. Fortunately for me, the latter number is the larger of the 2, so I’m profitable.

I’ve been a consultant for several small, but fast-growing money management firms.

I've ridden the emotional waves of trading to ridiculous highs and near devastating lows.

In other words, I’ve been at this long enough to have “seen it all.” Or certainly most of it.
And I can say with ZERO hyperbole or exaggeration that short term trading is the best money making opportunity available anywhere.

Practice

I spend time with the market every single day that it’s open.

At the time of this writing, I probably average somewhere in the ballpark of 5-20 trades per day. Note: my intraday trading strategy uses scalping with tiny stops as a risk management tool, thus to achieve my daily goal most days, my activity (number of trades) has to be higher than what might make sense to you.

Even back when I was working 9–5… actually, who am I kidding… more like 6am to midnight... I would still cram in 2–3 hours of screen time every day.

Over the years, and as people around me have watched my career evolve from cranky employee in a declining industry to professional private trader, many have shared their own desire to start trading and leave the “rat race.” They always ask the same question: “How did you get to where you are today?”

My answer? By studying charts. A lot.

And no, I don’t mean mindlessly sitting in front of the tv while I “study.”

I remember reading a book many years ago about how much screen time a trader needs to become proficient. The kind of proficient that allows you to understand the tilt [likely direction] of a stock chart at a glance. The author of that book suggested spending at least an hour a day with your charts. I chuckled because even then with a demanding day gig I got in at least 2 hours per day during the week… and far more on most weekends.

When I tell people how much time I spent (and spend) with charts, most don’t believe me. They insist I’m doing the math wrong — which is fair, seeing as I’m no math genius. But no, I got this right: about 20 hours per week on average… every week… of every year… for the last 20 years plus… puts me just north of 20,000 hours of screen time.

Here’s what I learned from that much screen time... Trading is a skill. And just like any other skill, you can get better... but only through 1 thing...

Practice.

And not just any practice… Deliberate practice.

Deliberate practice is a very specific kind of practice. The best way to describe it is as focused practice. It’s done consistently with great intensity and with limited distraction.

The kind of practice that you only get with discipline.

Focused, intense, disciplined practice can yield incredible results.

But to be honest, I haven’t always understood discipline the way that I do now.

I knew it instinctively, but I wasn't very accepting. Years ago, I didn’t really reflect on my habits and extract the powerful lessons there for the harvesting. I was pulled by pure curiosity.

Even after I read the incredible book Talent Is Overrated by Geoffrey Colvin, I wasn't fully convinced.

It wasn’t until the past 4 years, through meditation and writing (and being forced to reflect and verbalize so much of my own personal material as part of it) that I realized just how profound “deliberate practice” really is.

What I’ve also realized is that, whenever I talk with people about trading, or how they can get started trading for themselves or how they can improve the trading they’re already doing. I now see that we’re never really talking about trading… trading is actually  fairly simple when it comes right down to it... What we’re really almost always talking about is discipline.

Discipline

People tend to struggle with discipline.

You don’t know discipline until you’ve done something every single day for an entire year straight.

Most people can’t do that with anything in their lives— and never do, which is why the ability to make use of discipline is so uncommon. But truly, “learning” discipline is not that difficult. It really comes down to one simple act, and nothing more: did you do what you said you were going to do today, or not?

Yes or no?

Where most people fail is not in being physically, mentally or even emotionally incapable of performing a task, but rather thinking that today, “just this one day,” doesn’t matter.

“It’s just one day,” they say to themselves. “I’ll do it tomorrow.”

And then tomorrow comes, and the same excuse is used again.

But you don’t know discipline... can't know discipline, until you’ve forced yourself to meet a goal for the day, every day, no matter what for an extended period of time. Even if you’re exhausted and your eyes are burning because you’re sleep-deprived. Even if all your friends are going to a party and you’re left with your work. Even if it means locking yourself in your home office, turning off your phone and getting it done.

I didn’t become a professional trader by getting a degree in “trading” (I do have a couple of advanced degrees, but none are the cause of my trading success).  In fact, I would go so far as to say my results are despite my formal education.

Nor did become a professional trader because I “knew someone” or got lucky.

I became the trader that I am today by trading every day. At first via “mental trades.” Then through simulated trades. And finally through small live trades.

Win, lose or draw, I kept trading… 

Kept coming back. 

Kept showing up.

What I learned from so many trades per day for the past 20 years is that you get to where you want to be in life by doing. That’s it. Not by talking. Not by thinking. Not by brainstorming. Not by daydreaming. Not by wondering.

Doing.

So... Did you do what you said you were going to do today?

Secrets of Simple Trading

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