Trading: The Most Valuable Skill

I’m writing from Bogota, Colombia this week. Enjoying practicing my broken Spanish and watching the waiters bring me a hot chocolate when I asked for a chai latte. Problemas del primer mundo!

I’ve been reflecting on how fast the world is changing. From weekly technological shifts, to social trends, to changes in both the political and geopolitical landscapes. So much is moving. It’s tough to keep up.

Couple that with changing personal trends like remote working, the general push for more freedom, autonomy, and ultimately people’s desire to be living on their own terms rather than their employers. What a great time to be alive!

That said, it’s more essential than ever that we anticipate change, and upgrade our skills to remain relevant in the new world. So what will stand the test of time?

Considering the personal need to adapt to change over the next 2-5 years, trading remains one of the most relevant skills as global markets continue to grow in size and sophistication. It allows us to grow personally, financially, and can be done geographically from anywhere, at anytime in the world, even from the convenience of a mobile phone.

Today I want to set the tone for one of the core pillars of this blog with an introduction to trading.

The Problem:

It’s not that you must be a rocket scientist. It’s not that you need a finance degree. It’s not even that you need to have worked in a financial institution.

The problem is that beginners treat trading as a get-rich-quick-scheme. A game. They have unrealistic expectations on what they want to achieve.

Trading is a business.

The majority give up after a few costly setbacks, avoid facing the learnings, and then spend years learning the same lessons in another venture.

“The market is always right. You are wrong if you are losing money for any reason at all.” Mike Platt, British billionaire hedge fund manager.

A good friend recently explained how he'd doubled his new trading account in a month with a simple strategy of going leveraged long on an equity index (like buying FTSE 100 index on leverage).

He'd started trading as a side hustle with capital of £50,000 and no market experience other than working in Banks as a senior project manager. (You don't need £50k to start trading, an account can be opened with less than £1k).

He made £50k in his first month trading and felt on top of the world. With that confidence, he continued to leverage the same position with more capital, and eventually lost -£50k in a single evening as the market turned sharply. It's a classic story we've all heard some form of.

As a result, he stopped trading completely because the pain of loss was so overwhelming.

Don’t let this be you.

The learnings, to name a few: A) The pain of loss hurt him emotionally to the point he didn’t realise he hadn’t lost any initial capital, only profits. B) His strategy was flawed and needed development, C) He had no risk management – time to learn and implement, D) He had unrealistic expectations on markets, E) His tolerance and understanding of risk was wildly lower than the positions he'd been running, F) He had a dangerous use of leverage that was going to put him out of business sooner or later.

All those learnings and more in a single evening. How long do you have to wait for those lessons in any other venture? And how much more would it cost you?

“Success is nothing more than a few simple disciplines, practiced every day; while failure is simply a few errors in judgment, repeated every day.

It is the accumulative weight of our disciplines and our judgments that leads us to either fortune or failure.”

The Opportunity:

Whether you’re interested in finance, entrepreneurship, or simply personal growth, trading has the potential to transform your life.

As an introduction, I want to explore some of the reasons why trading is such a valuable skill and how it can help us to thrive in every area of life:

1. Financial Independence and Wealth Creation:

Trading provides an unparalleled avenue for achieving financial independence and wealth creation. By mastering the art of trading, we gain the ability to leverage capital and generate returns. Making money, from money. Unlike traditional employment, where income is limited by fixed salaries, trading allows for unlimited profit potential. With dedication, knowledge, and discipline, traders can grow their wealth, and secure their financial futures.

2. Adaptability in Dynamic Markets:

The modern world is marked by constant change and volatility. Trading equips us with the ability to navigate and capitalize on market dynamics. Whether it's stocks, commodities, cryptocurrencies, or foreign exchange, the trading skill set enables us to seize opportunities across various markets. The agility to adapt to shifting trends and capitalize on market inefficiencies provides traders with a competitive edge in an ever-evolving landscape.

3. Entrepreneurial Mindset and Risk Management:

Trading cultivates an entrepreneurial mindset that transcends the world of finance. Successful traders develop skills such as risk management, strategic thinking, and decision-making under uncertainty. These transferable skills are vital for entrepreneurship, where the ability to assess risks, make informed decisions, and manage uncertainty is paramount. By honing our trading skills, we gain a solid foundation for pursuing entrepreneurial ventures and embracing calculated risks in diverse fields.

4. Analytical Skills and Critical Thinking:

Trading is a discipline that demands sharp analytical skills and critical thinking abilities. Traders analyse market data, interpret charts, and identify patterns to make informed trading decisions. These analytical skills are not only valuable in financial markets but also extend to problem-solving in various domains. The ability to gather, interpret, and analyse information empowers us to make data-driven decisions, assess risks, and solve complex challenges in our personal and professional lives.

5. Emotional Discipline and Psychological Resilience:

Trading is as much a psychological game as it is an analytical one. Successful traders develop emotional discipline and psychological resilience to manage the rollercoaster of emotions that come with market fluctuations. This skill set translates to enhanced emotional intelligence, self-awareness, and mental fortitude in other aspects of life. Traders learn to control emotions, make rational decisions under pressure, and develop resilience in the face of setbacks. These qualities are invaluable for personal growth, building relationships, and navigating life's challenges.

The benefits of trading extend far beyond financial gains, permeating into every aspect of life. By embracing the art of trading, we can equip ourselves with a skill set that opens doors to limitless opportunities in all changing conditions.

A Call to Action:

For me, I’ve been in and around the trading environment in banks and hedge funds for 17 years. I’ve worked on multiple trading desks, across different asset classes, in different roles, in different countries, and integrated with different investor types all over the world from the United States to Hong Kong. I’m incredibly grateful for the experiences and connections along the way.

Institutional trading is very different to retail trading, but as with anything there is more than one way to skin a cat! There are huge advantages to being the small guy without corporate restrictions. Personal development is all about pushing comfort zones and trading is no different.

My trading account has returned +110% year to date. That said, instruments like cryptocurrencies are regularly moving >100% a day. There is more opportunity and market access than ever before for retail traders to make or lose fortunes.

In my experience there is no better field that will test and grow all of your emotions from fear, frustration, and anger, to excitement, joy, and happiness. Mastering emotions maybe the greatest challenge we all face.

The learning and growth required to make money consistently in trading is never-ending, as with any business or discipline. Losing money at times is part of the journey (university fees). But the rewards can also be exponential for those that are hungry and willing to grow. Freedom, independence, abundance, self-mastery, knowledge, travel, and adventure to name a few.

Here is a nice article covering a Michael Platt interview for the book Hedge Fund Market Wizards. It gives a great insight into what one of the best fund managers in the world values in traders that he employs:

http://www.marramllc.com/blog/pmjar/1945#

“I look for the type of guy in London who gets up at seven o’clock on Sunday morning when his kids are still in bed, and logs onto a poker site so that he can pick off the U.S. drunks coming home on Saturday night. I hired a guy like that. He usually clears 5 or 10 grand every Sunday morning before breakfast taking out the drunks playing poker because they’re not very good at it, but their confidence has gone up a lot. That’s the type of guy you want —someone who understands an edge. Analysts, on the other hand, don’t think about anything else other than how smart they are.”

“I want guys who when they put on a good trade immediately start thinking about what they could put on against it. They just have the paranoia. Market makers get derailed in crises far less often than analysts. I hired an analyst one time who was a very smart guy. I probably made 50 times more money on his ideas than he did. I hired an economist once, which was the biggest mistake ever. He lasted only a few months. He was very dogmatic. He thought he was always right. The problem always comes down to ego. You find that analysts and economists have big egos, which just gets in the way of making money because they can never admit that they are wrong.”

Here is an amazing article from Ray Dalio on market cycles, from April this year:

It’s a great insight into cycles, where the world is right now, and a great place to start when thinking about trading and beyond:

https://www.linkedin.com/pulse/where-we-big-cycle-brink-period-great-disorder-ray-dalio/?published=t

What's in the way of your trading journey?

Message me.