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Patience is the key to trading success.

loungeA lot of people expect that trading the stock market is easy and they will start and instantly find trading success. They tend to focus on the easy money that’s made out there. You know the stories of people that have made a lot of money, and sometimes that is based on pure luck. That’s a natural human desire, to focus on success –we all want to be lucky. It’s like buying a lottery ticket. Everyone reads about the guy that wins twenty-five million dollars, but they fail to see the other four hundred and eighty thousand people that lost their money on the bet. It’s the same with golf. You’ve got Jason Day, Jordan Speith and Rory McIlroy and what you don’t see is the other twenty-five thousand people slugging it out, sleeping in the back of cars, trying to make some coin as a professional golfer.

Making money trading may not happen next week, maybe not next month, and maybe not next year… but it’s going to happen eventually. I think the goal in your first year is twofold. Not to blow your account up –that’s a significant goal right there. I guess if we use the golf analogy, try and keep the ball on the fairway. Don’t worry about trying to shoot a par or a birdie, or that kind of stuff. Just keep the ball on the fairway and let it unfold from there.

The next factor is to allow the trades to unfold. You can’t control the market. The want or the need to look at prices during the day is nothing more than you willing the market in your direction. Wanting the market to do what you want it to do, that’s your ego coming out. You can put a steak on a barbeque but you can’t will it to cook. It’s going to cook in its own time. It’s the same with trading. You can look at the price as much as you want, it’s not going to make it move. If you understand that your strategy has a mathematical edge, and that it will work over the long term, then there’s no need to be watching the price every minute and every hour. You’ve just got to let it do what it’s got to do, and the strategy will do what it’s going to do over the longer term.

Back in the late nineties I ran a hedge fund with a partner. He thought running a hedge fund was all about buying and selling. You know, doing the cowboy thing, you came out of a dealing room with a big bank and you’d buy and sell and buy and sell, and that’s what he thought it was all about –but it’s not. Once you’ve got a strategy, once you understand the strategy is going to work, and it’s got a mathematical edge, then you’ve just got to let it go. There’s nothing more to be done. Your time is taken by continuous research in the scope of a hedge fund, for example. The name of the game is not about trading –it’s about raising money. So, you need to understand that your strategy is going to work, and then just let it do what it’s going to do. Spend your time doing other things like research.

I don’t read financial books anymore. That’s part of me stepping away from the market. I don’t need it. I do enough research –not saying I know everything, but I know enough to know that what I’ve got is going to see me through. That’s not to say that I don’t want to learn anymore, but I learn via my own research.