Trading Truths To Learn Or Liquidate By #7: Practice Makes Probable

10,000hrs and the principle of practice making probable, not perfect…

Macolm Gladwell the famous investigative journalist is the most prominent proponent of the principle of the necessity of 10,000hrs of practice to the achieve excellence in any field, a rule he made famous in his fantastic 2008 ‘Outliers’. In the book he outlines various stories that highlight the notion that to achieve a level of professionalism in any endevour, based on a time commitment of four hours a day the average person would need to commit ten years of their lives i a journey to attaining excellence in any field.

One of the examples he gives is asking a friend who was a famous record manager at Warner music asking him state which album he thought was the best in the catalogue of record released by the world redound band Fleetwodd Mac, as anticipated the music man immediately suggested that ‘Rumours’ was the pinnacle of Fleetwood Macs work. This album is in fact widely accepted as their premier production when he then asked which number in the catalouge of their work the album came the music man posited three, their third album. It was in point of fact their sixteenth album and the band in various forms had been together for ten yen years by the time they released it. This story is offered as an illustration of the common misperception that when we see excellence we believe it to be a natural gift that is derived by chance, what we fail to perceive is the inevitable blood sweat and tears behind success in any field that leads to the point of perfection.

Trading is no different to any other cognitively demanding pursuit, the problem in this business is that the uninitiated are bombarded by the false promises of get rich quick schemes, which fail to advertise the realities of the business.Furthermore, these charlatans fail to suggest actually committing yourself to the business and learning it inside out. Think about it you would watch a two minute video on dentistry or take a five day course in neuro surgery and step into an operating theater an open up a member of your family. So why should trading be any different. This participle is equally applicable yo your financial well being it is ludicrous for someone to believe that they can watch a 45min trading education video and then take their retirement capital a move it straight into a live account leverage up and multiply ten fold by year end. That is simply never going to happen.

So if we take the conscious decision that we want to self manage our money in the markets then we must also take the self conscious decision that we are going to have to seriously apply ourselves to learning about the markets and then we must further commit to developing a successful and profitable trading strategy, we then have to rigorously test that strategy refine it, develop an appropriate risk management strategy and son, now this wont necessarily take 10,000hrs but it sure as hell will take longer than 10,000minutes.

Even once you have developed and refined your strategy you will then need to practice deploying that strategy testing in a demo account, deploying real capital scaling up your capital exposure as you become more skilled in trading your chosen strategy, this again will take significantly more that 10,000minutes.

Then even once you have become skilled in deploying your strategy and become comfortable with the psychological challenges of managing risk, experiencing drawdowns adverse and favourable markets condition’s even then you will never really perfect the skill of trading at best you will prefect the skill of operating skilfully in an environment whereby your best and practised efforts can only deliver probable outcomes under ambiguous conditions. Once again this is a commitment in excess of 10,00minutes.

Now please note I am not trying to frighten or warn anyone off from undertaking this endeavour but what I am trying to give you is a genuine sense of  the scale of the undertaking you are embarking upon, there are no short cuts in life or in trading.

Friends and Family alike often remark to me that my life must be great, I spend a few hours in a comfortable chair in my well appointed home office trading, from which I reap a handsome living, what they fail to see is my personal journey of blood sweat and tears, the liquidated accounts, the self doubt and the hours days week and months, three years in total (not 10,000hrs but not far from it) that I had to commit to learning to become a consistent and profitable trader, a high probability not perfect trader.

Read the rest of the Trading Truths series here