In these times of festivities, here is something to ponder on. If you are not the pondering sort, well, you could simply skip the rest of this article .The topic is on patience. The common saying is that Patience is Power. It is. Confucius the Chinese philosopher also said ‘All comes to those that can wait’. Essentially, what we are talking about here is the ability to push aside the intense desire to have Instant Gratification.
As James Clear puts it, ‘Most people optimize for the day ahead. A few people optimize for 1-2 years ahead. Almost nobody optimizes for 3-4 years ahead (or longer)’.
The person who is willing to delay gratification longer than most reduces competition and gains a decisive advantage.
This is often mentioned in investment circles and indeed, is advocated as one of the reason why investing works. You allow the passage of time to work for you. It was Charlie Munger who said that the only thing a person has to do for making very large returns is NOT to interfere with the compounding process!
Instant gratification (the need for, i.e.) is the greatest enemy to all of us becoming wealthier from the markets. If you look around, you realize that it is not just you but the environment too that is responsible for it in many ways.
The channels, for one. Since their entire self-worth lies in the ‘you-heard-it-here-first’ syndrome, they are all about ‘breaking news’ and how it has created an instant impact on the viewers. Then they run that news-bit all thru the day, spewing it out in various forms till it is,verily, coming out of your ears! With this much of bombardment (visual and audio), it becomes quite difficult not to keep checking for the returns that you have made (or not made). Even if your view is long term or the event is, the constant barrage of info on that news makes it difficult to think beyond. The next day there is something new and another cycle of the same thing occurs. When this happens a few days in a row, you have already forgotten the one you focused on (and perhaps acted) five days ago. Intense focus on instant gratification keeps all of us on the treadmill of the ever-changing new one!
If the channels are not your thing, then Telegram and Whatsapp groups are the next major culprits. These two churn out so much of information (most of it copy pasted or forwarded) that our attention span keeps getting fractured. Some of these will always move- obviously since you are probably looking at some 50-100 names- and that immediately gives rise to a feeling of ‘Oh I could have got into that one and profited!’ Then there is that useless culprit- Twitter. Instant gratification at the highest! I don’t know how many fake trading billionaires are there on Twitter! Every third guy is about how many lacs he made today! Sometimes it is crores too- especially on options expiry day. What can produce a greater desire for instant gratification than the nonsense posts like these?
So, my point here is that the ‘normal’ trader or investor is doomed- the environment will simply not allow him to work on a personal weakness (the need for instant gratification) and therefore he is fighting a losing battle and does not take long to give up this fight. Mainly because he doesn’t even recognize that the environment is rigged against him! Other people playing their own agenda is the problem here but, just as in life, it is very difficult to realize that you are being played.
I don’t want to convey that all those posts about money being made is false or lies. It IS possible to make huge amounts of money – even in a day- but no one ever talks about the kind of capital that is required to put on the kind of positions necessary, the kind of risk taking ability that one has to have (both financially and mentally), the kind of trading infrastructure that is needed to do this etc. etc. The way these posts run tends to give a feeling to the lay trader that even he can do it with his limited capabilities of capital and non-existent risk definitions etc.
Patience cannot, unfortunately, be taught. It can only be indicated. Everyone tries to do this in investing by making statements like
- There is only money to be made in the long term
- Trading is a sucker’s game.
- Allow the power of compounding to work for you.
- It is time in the market and not timing the market that works.
This is a lot easier to follow so people accept this immediately. Some of them even do a few of these. But for the vast majority of others, even this becomes difficult because of the factors I mentioned earlier.
Can this be done in trading also? Meaning, can we exercise Patience and make it a Power?
The answer is Yes but it requires a great deal of work. The immediate question is whether it is worth all that work? My answer once again is a Yes.
See, in investment, a ‘reasonable’ rate of return is considered 15-20% cagr annually. All other instruments (including mutual funds) give you a return between 7-!3% returns as long-term cagr. But trading, if done in the proper way, can give a hundred to several You read that right- several hundred percent. How so?hundred percent returns!
I shall use the example of my service Markets with CKNarayan– a daily market commentary service with trade and investment recommendations. I state that the capital required to participate smoothly in this service is about 10-15L. In an average month, the utilization seldom exceeds 10L by way of margins. The average return per month has exceeded 2 lacs per month. This is a 20% return per month. If you take this kind of return then you are really talking 200-250% per year. This is not included the stocks where views are given (many of them turning into successful day or short term trades), multi-day or week positional calls (producing large returns in a few weeks) and investment calls (usual returns) etc.
Since the service is rendered real time there is absolutely no fudging of any of the returns or convenient spread sheets shown at the end of month. I have been doing this month after month and this is clear proof that if one just does trading a bit better, the amount of returns that one can make can be substantially greater. But one has to believe. And this is where another difficulty crops up.
Even after seeing what is possible, there are people who won’t do what is required. Either they want more (like NO losing days or stops should not be hit etc.) or they simply don’t believe that this kind of success can be repeated into the future, month on month. Despite seeing that very high returns are possible in trading successfully, their belief in the safe 15% Cagr is so strong that it forces then into believing that anything different is NOT possible. They much prefer to remain where they were (the comfort zone) than take efforts to venture into a new and more profitable zone. They reconcile this by excuses of how they don’t have the time, how their other matters intrude into trading full time, how they cannot take the risk etc. etc.
These are not reconciliations- they are excuses for not doing what is to be done- indeed, what can be done. Imagine, why would I want to remain stuck in an activity that is probably going to get me some ordinary returns for my efforts (like my job or business) when I can get many times that in trading successfully? The only answer is – lack of belief and a lack of willingness to do what needs to be done.
Your actions are a result of your emotions and your emotions emerge from the beliefs that you hold in your mind and heart. The biggest risk to improving your lot is to focus on the wrong thing- in this case a less productive activity.
But let’s get back to what we were talking about- patience as a power. Returns of 250% occur from consistency in action. And for achieving consistency we need to implement well. To implement well, we need to have practiced something many times. This needs focus on that matter. And we cannot produce the necessary focus if we allow ourselves to be distracted by TV channels, Telegram and Whatsapp groups and other external inputs.
Once those impediments are removed what is left is the real matter and you. Using some consistent approach to deal with the real matter (something that needs to be learnt and practiced), you can then create the focus leading to proper implementation producing the requisite results.
The need for instant gratification will progressively vanish and get replaced with patience- for the process to be played out and run its course. The process need not be multi-year as in investing. It can be just multi days or multi-week in trading. It can even be intra day (there are 5-20% winners almost every day). However, one must allow for the process to run its course so as to reap the max benefit of short term moves. The long term, after all, is just a series of short terms that mesh into one another. Gathering skills at reading the short term and then practicing the skills at implementing the process to take advantage of the short term swings is what produces superior returns.
It is possible to do. But it is our responsibility to do it. Others can show you the way, ease your path, shine a light, provide a milestone etc. but you are the only one that can walk the path. Go for it. Raise your returns by many notches. Get out of the instant gratification habit. Adopt a process. Practice it till you can do it as flawlessly as possible. The road to higher returns shall open for you.