Short Term Trading (Australia Day) Weekend Lounge: 25-28 Jan, page-59

Youth  Group's  cover of Alphaville's Forever Young




Overtrading is a good way to lose money.  The problem with this cliché, though, is that everything is relative; only you can know if you are over-trading.   Which leads to -

Failing to appreciate the value and art of doing absolutely nothing.  In most paying jobs, if we stop working we are not living up to our potential and we feel guilty.   Trading is sort of unique in that our ability to slow down or stop for periods is essential to maintaining both capital and sanity.   I’ve never returned from a break to find that all the good trades had left without me.

Failing to come to terms with our own behavioral tendencies.  Again, figuring out your personal strengths and most importantly your weaknesses is easier said than done.  You could get objective insight from a behaviorist, but that could get expensive.  Or you could just ask your spouse or mother in law to make an unvarnished list of your shortcomings for you.

I have made too many mistakes to list:   If a trader can make it through his or her formative years in the seat with sufficient trading capital intact, they are blessed.  In those first years we sometimes perceive trading as something akin to gambling.  We might find ourselves wrapped up in magical thinking; we might rely on imagery of preordained destinies or expectations based on the blood and sweat and extreme stress that by any other standard should result in great rewards.

It seems that one mistake is not thinking enough about or being critical enough of my own concept of time.   This sometimes meant being unconscious of how much time I actually had in a derivatives trade – math is so much more boring than gut feelings - or how much time I had to get to a financial goal or self-imposed milestone in trading.  Perhaps understanding how arbitrary, imperfect and fragile our concept of time can be is important in everything from derivatives trading to investing.  

Of course this is not unique to trading.  Just ask an elderly person about the subject of time in the context of the important things in life.