Jack Cahn, ThinkingMansTrader.com
In every high-risk industry from medical surgery, flying a passenger jet, building a skyscraper and trading futures, you need a regular procedure for implementing all the specialized functions.
I wonder how often people, who would like to be successful traders, read statements like the above and think, “what a lame excuse, I am buying a system, so I don’t need to do the hard work.”
However, that is only partly true. Here is a fact, when the medical community was asked how to decrease the risk of surgery from complications or death, systematized teamwork was the answer. This is something that on the surface sounds easy but in real time it is one of the most difficult processes to implement. In trading, we are all Mavericks or deviates who are fiercely independent!
In the Post-Information Age period – today’s Digital Era -content information has exploded leading to increased specialization of professionals in every endeavor. In other words, knowledge today is very individualized.
Thirty years ago the successful trader/ speculator was the daring independent cowboy. Today the cowboy knows he can’t do it all himself; he can’t know it all himself. When he thinks he does he is quickly humbled by a detail he has overlooked. Ring a bell?
The devil is in the details. In other words, whatever one does should be done thoroughly; i.e. details are important; don’t be catch by mysterious element hidden in the details
Today the amount of information available via computers almost acts as a censoring device, keeping you from knowing the facts and what is real. Furthermore, institutions like Goldman Sachs have real competition from the creation of worldwide networks.
What risk managers have learned is that daily/weekly procedures to manage trading strategies are needed. I talk to many successful TMT’s; they have all succeeded in some other vocation or sport based on practice and a regular procedure (or ritual.)
Here are three sets of skills to build to be a success trading:
1. Develop your ability to see both failure and success. A specialist can only see his data; a good trader needs to know what is overlooked. The past election (2016) in the USA is a good example of overlooked data by all the traditional polling services. It is the unique point of view, the thinkers outside the box that can and do provide the data, the insights. They are needed to see the details being missed that can lead to failures. For an easy example, a swing trader overlooking a roll date or a programmer confusing a price exit with a money stop.
2. Develop a regular procedure that works towards solutions to the failures. Too many traders and developers are stuck refitting their technology or looking at more technology when the answer is human. Leaning on too much technology will lead to the trader biting off more than they can realize. I mean today the technology cannot get much better – when it does, it is only incrementally so; it is simply an easy scapegoat for losers or a sideshow for “sell side” hawkers.
3. Develop a daily procedure, no matter now automated your strategy. The ability to implement a checklist, like a pilot does before a flight, will lead to more success. Write it down and check off each day. Keep a journal. What leads to your decision to trade a particular market and particular strategy? Did you decide to act before a winning streak or a drawdown or a period of mixed results? What gave you the insight to take full advantage of the profit streak? Write it down in a journal and learn to share the ideas and look for feedback from your peers.
Respected doctor and surgeon Atul Gawande summarizes the use of a team and a this way: “The use of a (a procedure for system’s trading) forces us to acknowledge that we are not systems in and of ourselves!”
If you take anything away from this brief, this is all important for the trader be a consistent winner today:
“He must embrace values that he does not normally hold close like humility, teamwork, and discipline.”
Skill number three above is difficult because the vast majority of us are mavericks, cowboys shooting from the hip traders! We see it as being girl play to use a checklist, God forbid. Nor can most of us understand the reason behind the “how” not using a checklist will lead to increased risk.
A wise man told me that if you are going to do a job, you may as well do it right, make it count! You have worked hard for your money. Treat it with the same respect as much respect as a pilot has for flying his aircraft or a race car driver has to his formula one car.
As I alluded to above, studies have proved that teamwork reduces risk by 45%.
It is your life -money- that is on the line, and the use of a checklist reduces the risk of death -loss – from surgery -from trading. So use one.
Maybe just maybe working within a group like Thinking Man’s Trader community should have your attention. It’s a perfect time to start going into the new year to plan your best year ever. If you’re going to risk your hard earned money, join Thinking Man’s Trader to help you expect the unexpected.