A Journey without an End: How to Continue Learning

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A Journey without an End: How to Continue Learning

As we near the end of this book, I compliment you on your persistence and commitment. We have worked through the essential trading topics: psychology, tactics, risk management, and record-keeping. Still, becoming a successful trader will take more than reading a single book.

How long do you think it might take?

You may have seen this huge number—10,000. According to some authors, that’s the number of hours it takes to become an expert in major pursuits, such as professions or sports. If that is true and you spend 40 hours per week, 50 weeks a year, it’ll take five years to become a pro. If you can invest only 20 hours per week, it’ll take ten years. That’s a scary thought.

If you, like so many people, came to trading after a successful career in another field, be it engineering, farming, or business, you may well have invested that many hours in it. Do you really want to spend another 10,000 hours on a new project at this stage of your life?

Before you shudder at this prospect, let me share a very different number with you—20 hours. It comes from a book, The First 20 Hours: How to Learn Anything… Fast! Its author, Josh Kaufman, makes a sensible point that while becoming a worldclass expert will take years, you can achieve a basic level of competence in most fields in a much shorter time.

“The early hours of practicing something new are always the most frustrating. That’s why it’s difficult to learn how to speak a new language, play an instrument, hit a golf ball, or shoot great photos. It’s so much easier to watch TV or surf the web*…*” he writes. To learn a new skill, you need to find the experts and get their materials, create an action plan, and make an absolute commitment to studying and practicing without any distractions.

By completing just 20 hours of focused, deliberate practice, you can go from near zero to performing reasonably well in many fields. Kaufman describes how he took 20 hours to learn several new skills, including windsurfing and programming a website. Even if you take up a more complex activity, such as flying, 20 hours will get you through the ground school and the first few lessons with an instructor. This won’t make you a pilot, but 50 hours of flight time should earn you a private pilot’s license.

The number of hours for mastering basic trading skills is even higher, but much closer to flying than to 10,000 hours.

The intellectual demands of trading aren’t high. After all, we deal with only five numbers—open, high, low, and closing prices, plus volume. The main difficulty comes from our emotions. Trading stirs up powerful feelings, the strongest of which are greed and fear.

New traders focus on money, dream about what their profits will buy, and throw caution to the wind. They buy as many shares as they can afford and double up on margin. Filled with joyful anticipation, they write down no trade plans. When a trade turns against them, their emotions swing from greed to fear. That’s when they freeze, while the market grinds down their accounts.

Technically, trading isn’t very hard. Psychologically, it’s the hardest game on the planet.

To reduce the stress of trading, keep in mind several essential points. Your trading life depends on following these rules:

• Trade small sizes while learning.
• Do not count money while in a trade.
• Use risk management rules, primarily the 2% Rule.
• Write down your plans, especially these three numbers: entry, stop, and target.
• Keep a trading diary and review it at least once a month.

Most traders are terribly isolated and never get to see how others practice their craft. This isolation contributes to impulsive trading. A private trader who violates every rule in the book and makes gross errors remains invisible to others. Nobody will warn him to stay out of trouble or praise him for a good trade.

In the old days, our brokers knew what we were doing, but now we place orders online. The only human who may contact you about your trades is the margin clerk at a brokerage firm. Getting a call or an e-mail from him is never good news. I hope that you never meet a margin call, sending good money after bad.

To break out of your isolation, to see what good traders are doing, and to be rewarded for your performance, I suggest you look into SpikeTrade.com—a website I run with my friend Kerry Lovvorn. That’s where traders share ideas and advice, engage in a friendly competition, and comment on each other’s trades. Time and again we see people come in at a fairly basic level, start submitting picks on a voluntary basis, earn performance bonuses, and rise to become serious traders.

I wish you success. Trading is one of the hardest pursuits on Earth, but it’s an endlessly fascinating adventure that can be very rewarding. I’ve been on this journey for decades, and still look forward to every Monday, when markets reopen. While trading has made me free, I still catch myself making occasional mistakes and have to concentrate on my discipline. I reserve the right to be smarter tomorrow than I am today. It is a great journey, and I look forward to sharing it with you.

Dr. Alexander Elder New York–Vermont, 2014