CHANGE THE BEHAVIOUR

There are so many examples from life about how to succeed. Almost all of them have one thing in common- conditioning of behaviour. Read the books of great achievers and you will find this common thread. For the markets, a good series to read would be the Wizards series of author Jack Schwaeger.

Like many traders, Schweger too was at it for a while and not really succeeding. But unlike many other traders, he decided to do something about it. He went and interviewed a whole lot of successful traders and fund managers. Then he wrote a book on his interviews. And then another and another. Reading through the books, you will find common themes among the successful ones. They all had a method they followed. They maintained a good risk practice. They kept up the right mindset all through. Etc. It didn’t matter whether they were trading stocks or currency pairs or commodity futures or cryptos. The theme remained the same.

When Market Wizards became a successful book, many other authors too came up with similar books. And here too, the story was the same. Of course, luck played a part too in many people’s lives. But it wasn’t the primary factor. The ones I have enumerated above were the primary ones.

The other thing which emerges from the reading of these books is that achieving success in the markets is not such a big deal. Each of these people had one behavioural element in them- Consistency and persistence. You may get the method from someone else; you can borrow the money; you can employ some one or have a software handle the risk. But the mindset has to be your own. That cannot be outsourced.

How many people even realise this even after many years in the market? Not too many I reckon. I started trading around 1979 and it wasn’t until around 1993 that I got it. In those days you didn’t have the Internet nor email and books were hard to come by. There were no TV channels devoted to markets and certainly no WA University to spread gyan! Hence the progress was probably quite slow. These days it is the opposite. You have everything above and in spades! The difficulty back then was to find while today it is what to pick from the plethora that is available.

But now that the necessary elements are all present, there can be no excuse of continuing to be ignorant of the important aspect of mindset towards trading and investing. And, if you have become aware and have yet done nothing about it, then it borders on a crime! Against yourself.

Hence, here is a question that you need to ask yourself. Do I need to spend more time searching for better information or do I need to spend more time acting on the information I already have? Try and answer this honestly and the road to how you need to progress will open up immediately.

One of the more popular elements these days is Options selling. You Tube is flooded with advice on option selling and how it makes money. I am sure it does. You also get to see many boastful tweets stating how much they made doing this strategy. I notice one glaring missing element. Almost no one mentions the amount of capital they deploy for generating those profits. Most people end up with a return of @1%. Now, that is a good bit of money for a day’s work- provided the capital is large. For a 10cr account, the gains are 1 lac. But taken out of that context, a gain of 1 Lac in a day looks awesome.  The problem is that an average trader has a capital around 3-5 lacs. If he gives this approach a go, then at the same result, his gains will be some 5K. Considering what he has seen on the YouTube channel, this seems like pittance.

1% a day is great if you can keep repeating it- for, it can become a humongous figure through the power of compounding. Mostly, that is what most people end up doing- compounding it in their minds. But it is so difficult to keep up with that consistency. There are people who advise that once you make that 1% in a day, you should simply stop. But who will account for that seed of doubt that lies within every trader- the one that says, ‘What if I lose tomorrow’? Then the mind prompts, ‘Today I am on a winning streak so let me make some cushion for tomorrow by going for more today’! Or the scenario could be that you hit a losing patch and need to persist to eventually make it to that 1% gain. Can your mind handle it? Also, many of these practitioners are scalping the market. How many are adept at doing that? Ever wondered whether you are good at it?

I do not know whether all those people posting large figures of gains on Twitter or YouTube are really making that money or not. Let’s assume that they are all being honest. The money made is not the main element, then. The main element is that they are able to deploy the requisite amount of capital, work their method consistently, take all the signals that it flashes without doubting it and be active in managing the position all day to ensure the outcome.

It is only when all of these events occur that the results come out palatable. The whole series is the strategy. And the strategy is composed of smaller tactics- judge market direction, judge OI and IV positions, pick the strikes, pick sell or buy as the trade, track the open position based on changes in all the elements etc. etc. So, now, you come to whether your problem is Strategy or is it Execution? Ask yourself that

Strategies evolve. To get one, you have to try many things, new things when old ones don’t work or stop working, crazy things even when nothing seems to be working! But you never stop. The ideas may be original or can be borrowed, they can be modifications of some existing stuff- point is, you never stop. Persistence. That is the key. And once you have found something or created something, then do it over and over until you have perfected it. Consistency. That is the other key.

It may take weeks or it may take months. But you got to keep at it. Just keep leaning against the idea until it bends to what you want. This is the modification of behaviour that we need to produce. Without that change, nothing will happen.

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