The Zen of Trading
ritholtz.com
ritholtz.com
More than most professions, trading requires you to fundamentally alter the way you respond to stimuli. We have some natural biases that make us pretty unsuited to trading. Traders who are successful are the ones who remodelled their brain, a job that often starts with an intellectual sledge hammer. Studying a list of proverbs, no matter how good they might be, will not prove profitable. They might act as a good scaffold to lean on while "paying your tuition," but I am skeptical.
(This argument can be expanded to most proverb-style writings. In fact, I was going to write this in response to one of the 37,000 threads regarding ReWork during that mania.)
To be playfully ironic, I'll list what I think are the two biggest issues:
1) Completely demolish the instinct to extrapolate linearly.
2) Train yourself to have no attachment to your expectations. (Coincidentally, this is #2 on the referenced webpage's list.)
This is certainly not exclusive to trading (e.g. scientists should operate this way) but I think it's harder to practice in trading. Money makes consequences very concrete. (Edit:) If a scientist conducts an experiment that fails to find anything significant, it's still "good science (TM)." If a trader fails to be profitable, he has failed at trading.
My goal has always been and continues to be developing profitable algorithms. I have a few that are interesting, but none profitable enough to be noteworthy. (Although one is very very promising.)
I do actively trade, but not algorithmically. I make short to intermediate term bets based on macro-level observations. I've gotten progressively more profitable and more consistent, but given the events of the past three years, you could claim it was just luck and I wouldn't get defensive.
Regardless, trading has been my educator. For me, it was a valuable exploration, even if it never makes me rich. Trading forced me to be a better programmer; gave me an intuitive grasp of risk and statistics; and inspired my intellectual growth. In fact, it caused such a strong interest in certain types of system that am starting a masters/Ph.D program in computational social sciences this fall.
Farmers are usually the last to know about fluctuations of commodity prices. Commodities are driven much more by macroeconomic trends that farmers cannot be expected to bother with. And as for stocks and a fidelity advisor. Oh man, that is also very very wrong. Stock picking is about seeing trends before others do and being gone before those trends end. The former is a relatively common trait, the latter is rarely intuitive and pretty rare.
Otherwise, you are probably better off investing your time and money building something yourself, for reasons that completely ignore whether or not you are capable of doing well as a trader.
The part I liked the most is the Michael Jordan quote. I didn't know MJ so statistical, and now I respect him a lot more.
A trader should do the same. A simple system of logging trading decisions like MJ did will greatly help a trader improve.
I always wish there are some web app that logs what those pundits (stocks or whatever) said, and keep a tab of their accuracy.
In a similar vein, WSJ had a very clever "dartboard contest" for years. (http://www.investorhome.com/darts.htm) Unfortunately, it requires a subscription to see the results. You might find it interesting if you have one.
SPY = S&P500 Index ETF. That was actually a minor error on my part. I meant to link you to a comparison of BRK-A versus the SP500 index, not an trust that tries to mirror the SP500 index. Thankfully, for comparative purposes, they are virtually identical.