ELON MUSK LESSONS FOR A TRADER

We know that Elon Musk is a famous man. He got to be famous by doing great things, very big things. And succeeding. But do you know what one of his most famous lines is? It is used by him often in his endeavours. “This probably won’t work the first time.”

Can you grasp the enormity of that line? Musk, a man with his enormous riches, reach, capabilities, resources etc. etc. is willing to have low expectations about his project!

Now here is another enormous ditty from him: “Success is one of the possible outcomes.”

I think traders and investors should make those two lines their credo for the markets.

The problem with most of us who play the markets is that we expect success with every one of our trades. This leads us to build high, sometimes absurd expectations about our trades.

We have all been taught to think that higher risk equals higher returns. Sounds logical enough, doesn’t it? After all, we are taking the higher risk to achieve the higher return, aren’t we? Why else would we not keep our money in an FD- never mind the fact that we actually lose money in an FD (because inflation eats up the meagre returns that it gives).

So, every time you take a higher risk, you expect to be rewarded higher!

Now, have you heard of someone who takes bigger risks than a guy like Musk? But look at what he says (quoted above). He has such low expectations of his success. Why? Because, that is what helps him survive!

How so, you may well ask?

Low expectations mean you accept the possibility of losses, of being wrong. How many traders and investors are prepared for that, I ask you? When you put on a trade, do you ever tell yourself that this may not work? Note Musk’s statement again- he adds the words ‘the first time’.  This means that he is willing to try again and again before succeeding. Do we think about anything like that?

People buy my software Neotrader and have sky-high expectations that it will solve all their problems. Can it? Absolutely not. But when you have high expectations, then you are not willing to accept anything less

than perfection. So, if a trade or two hits stop losses (note- an entirely possible result), are they prepared for it? Absolutely not.  But if you apply the Musk model and think that my first set of trades may not work out the first time. And then add in the second line (Success is one of the possible outcomes), then you are willing to give the software a chance to work for you.

Any stock market product is built on the basis of probability, be it a forecast, be it a piece of advice, be it an algo, etc.  The way to work with probability is to have a lower expectation that gives the product a chance to work for you, to give you the patience to wait for the success bit to kick in. It allows you to work the service or a product like Neotrader to make up and be right, to bring in the profits, and then some!

If we are not succeeding in the market, the main change we need to create is to change ourselves. That means our minds. Building a habit of maintaining a low expectation will allow you to accept the losses (that are very much a part of the process) and increase the odds of you sticking around long enough to eventually be right enough to profit later.

That thinking is not just for Elon Musk alone. Every trader and investor needs to develop it.