One of the best pieces of advice that I ever heard came from veteran trader Joe DiNapoli. “My edge in the market is that I know myself. I have a trading approach that fits my personality, and I use it.” But do you know who you really are?
It is often said that you learn a lot about yourself when you trade, and the most common way traders learn about themselves is the most painful – by losing money. And it’s when you lose money that you (hopefully) realise what sort of trader you’re not. Only when you can recognise what costs you money can you then do something about it.
You have winners and you have losers. It’s obvious that by eliminating the mistakes from your trading you’ll be left with a greater percentage of winning trades. An analogy is the game of golf; we could score 72 every round if we could eliminate our poor shots. When I play golf I make 72 good strokes and also about 40 poor shots. Despite the 72 good strokes my score is 112 and that’s the bottom line. Your trading account is the same. The bottom line is a reflection of ALL your trades, not just your winners. Imagine how much better it would look without the poor trades then. So when you realise you’re not a big hitter, don’t try and hit big. If you can’t chip, leave the ball further away for your approach shot. If the pace of futures and forex scares you, swing trade blue chip stocks. If blue chips bore you then day trade small caps. There is an instrument, system, and time-frame to suit every personality, budget, and ability.
Define your weaknesses only so you can discover your strengths by which you can define yourself. Don’t define yourself by your weakness. We’re born with various abilities and varying degrees of patience and discipline and whilst we can improve in these areas we won’t greatly change who we are. Knowing who you’re not and what type of trader you’re not will assist you in recognising what type of person you are and what style of trader you should be.
A feature of today’s world is the abundance of self-interest groups who define themselves by their weaknesses, by their vulnerabilities. I regard this as a very negative practice. Wouldn’t it be better to stand out from the pack by defining yourself by your strengths?
Define your mistakes, know what you’re not; know what you are, define yourself. Know your weakness so you can trade your strength.
Eliminate one mistake at a time and improve your score.