I just watched Mike’s presentation in Georgia Tech and I have a question that I hope Mike could answer. He was talking about how he would feel at ease practicing basketball. I played competitively for 12 years and I know exactly what he is talking about. The court is like my home and I feel an inner peace and happiness whenever I am on it. I am 26 yrs old now trading the futures market intra day.
I love trading but I am definitely not feeling how I felt on the courts. I was wondering how long did Mike take to achieve that state of peace trading and just loving to get back onto the desk to trade.
Bella
For me it took about five years of trading before I felt it was going to be very difficult not to be positive every month. I define this as trading competence. The swishes from a shooting stroke became the ability to control my risk with almost all market patterns. Some say you need to survive a bear and bull market before you truly learn to trade. Others cite the 10,000 hour Gladwell rule, co-opted from Prof. Anders Ericsson of Florida State University.
There are different answers for different traders. So I ask: how long did it take for you to feel comfortable/competent as a trader?
You can be better tomorrow than you are today!
Mike Bellafiore
no relevant positions
17 Comments on “The Trader’s Journey: How Long Before You Feel Comfortable and Competent?”
Professional trader for 10 yrs now.. I first started to feel confident at about the 3 year mark. In the beginning wasn’t a heavy hitter but a consistent winner. I rarely had more that two days a month in the red during the 03-05 time frame. However, once that paradigm shifted, and my system began to dry up around 08 I started to lose confidence. I went from killing it to getting killed almost overnight. And I lost almost all confidence in my trading skills. I basically started all the way over. Adapting was much more difficult than I expected. I made many many changes.. going from scalper to a short term intraday holder.. moving from equities and optioins to index futures.. etc etc. And now after 3 years of flat to down.. I am finally getting my confidence back.
Still not there but getting much closer. Day trading for almost 2 years now.
In 1998 I started actively trading and I felt confident right from the start because I made good money going long tech stocks. Then I felt unconfident when I later lost those winnings. I adjusted my strategy and again developed confidence based on my success…but then lost those winnings as well. Ive been thru several cycles like this of confidence and then coming back to earth and realizing my confidence wasnt as solidly based as I hoped.
It took me 2 years before I was comfortable day trading, but that came after 10 years reading and studying the market. My true improvement, though, came once I began identifying methods to practice the actual mechanical skills needed for trading, in addition to the concepts, and I believe that’s the key to success. I know SMB and Bella already preach this, but too often others hear that they need 10,000 hours of practice to become experts, and they ignore that it takes 10,000 hours of “deliberate” practice–not hours of only reading about markets. You must push yourself beyond your comfort level, apply your work in sim and live, and make sure that you don’t push yourself to fail too often or you will become discouraged. I was my own mentor, but I can see how beneficial it would be to have a teacher during this time.
2 yrs, still nube and fear and diskomfort
2 yrs, still nube and fear and diskomfort
between 1 and 2 years.
Sounds really tough! How do you bounce back after 3 flat/down years?
Jeff
You talk about practice here which is a standout point. Was this practice just on the simulator? What other true practice techniques are there out there?
Currently I am trying to build up my day trading skills.
-I record my screens and re watch
-I go over all the charts end of day and highlight my trades, areas for improvement etc
-I write a blog pre market with my plan
-I spent 3 months on the sim.
Would really value wht other practice methods you used and recommend. Screen time I guess is the ultimate practice
Thanks
Austin
5 years about right, but even now after 15 years of trading I still improving. Think this is something we can never become complacient about
well, I traded for 10 years as an “investor” before I decided to become an active trader. It took me 4 years of really hard work (6 days a week, reading everything I could and attending numerous seminars) from that point to figure things out.
It has taken 3 yrs and a couple different methods to get to the point where I can say, “I can earn a living doing this.” I spent 1 yr at a prop shop, where I had consistently valuable time in front of the screen. Even though it has been 3 yrs, I am nowhere near where I want to be. trouble spots after three yrs: Patience to wait for a great set up. Not accepting the risk of a trade and cutting it early.. Usually with a small loss. There are more but the three yr mark seems to be a line in the sand where you can see the light or you must acknowledge potential defeat. Just my humble thoughts. Thanks, Justyn
Sure thing, Austin. I am talking about more discrete practice that can only be done with a simulator and methods to increase your comfort level before transitioning to live trading.
First, a caveat. These methods worked well for me, but there’s certainly no guarantee that they will work for all personality types. Also, if it matters, I trade futures, not stocks.
I broke down the areas in which I wanted to improve into three categories:
– Concept, which is any area outside actual physical trading (and outside what we’re discussing here).
– Mental, which are the “monkeys” that were limiting my potential. For example, I would take profits too early, so I needed to find methods to overcome this issue.
– Mechanical, which are the skills necessary to enter, manage, and exit a trade.
The goal is to find practice methods that emphasize the Mechanical aspects while helping alleviate the Mental issues, and often this is the type of practice that can only be done on simulation.
Like any athlete, you also want to practice, over and over, then observe the areas in which you’re having issues. Adjust. Then practice again. The sports analogy would be time spent shooting free throws, practicing chip shots, hitting sliders, etc.
Example: my inability to hold for larger profits. Instead of just trading as I normally would, on some days I would do ONLY the following:
– Enter a position with my standard stop loss, but with a profit target twice as large as normal. For example, if my standard profit target was two points, then the practice profit target was 4 points.
– Manage the position only by moving my stop loss manually to trail the position.
The specific mechanical skill is retaining focus in the market and physically managing a trailing stop in your software. The mental skill is learning to give your position enough room for pullbacks so that it can continue on to larger targets. At a higher level, it also helped me identify the type of movements characteristic of trend vs ranging days. Once I became comfortable with twice the target, I would attempt three for four times the target size.
Other methods that I have used in simulation are:
– Keeping a single position in the market for an hour (or more), only managing it by reversing the position from long to short to long. During this practice, I track how many reversals I do during an hour. My goal is to reduce the reversals to as small a number as possible, while maximizing profit (or minimizing loss)
– Practice as a scalper even if you’re not a scalper. The goal is to more quickly increase the number of round-trips in which you have experience. Practicing hitting the bid (or the ask) on market turns. Exiting at small profit or loss. Re-entering at next small peak or pullback. You want to know that you’re truly comfortable with the mechanics of your software when the market is erratic or moving fast.
– Make a prediction at the top of the hour (or half hour) whether your stock will be higher or lower by the end of the hour. Another method to learn to watch the bigger picture.
– If you are consistently losing money on simulation, then try to lose a specific amount of money as fast as possible. If you invert profit and loss, and you are suddenly making money, then you may more clearly see some of the issues that are holding you back.
Two pieces of advice.
1. If you’re becoming frustrated, take a break. Ericsonn has described that many successful experts became better through short, intense periods of challenging practice, followed by longer periods of rest, while those that improved more slowly tried continuous grinding practice without rest.
2. Don’t worry about being perfect at any of these skills. It won’t happen, and that is absolutely okay. None of us are perfect:) The real goal is to move to live trading with more experience under your belt. There are a lot of simulation users out there who may never move to live trading, because they’ve become addicted to getting high scores only in practice.
Hope that stimulates your thinking. There’s many more things to practice, and these are specific to issues that I know I have, so I wish you the best of luck with your own.
Jeff
What an absolutely fantastic response. The breakdown of “concept”, “mental” and “mechanical” seems vital here.
I too trade equity index futures and not the underlying stocks.
I will take much of this on board and develop my own practice routine. I think I am aware of the areas I need to work on and improve.
One final question- your simulator is essentially a demo account of a real trading day? Did you also practice on a simulator of a prior trading session? I.e. is it possible to re-trade a day as it where and is there any particular software you could recommend that does this?
Thanks so much. Honestly, this was such a thorough and helpful response.
Austin
Thanks Austin. I’m glad that I could contribute.
While I didn’t practice on a simulation of a prior session, I see no reason why that would not work, if you use sessions for which you don’t already know the outcome.
I believe NinjaTrader has this capability, Perhaps Investor R/T might, also. Perhaps someone else can confirm.
Jeff Carroll wrote:”Ericsonn has described that many successful experts became better through short, intense periods of challenging practice, followed by longer periods of rest, while those that improved more slowly tried continuous grinding practice without rest.”
That caught my eye and I’d like to read more. Do you have a citation ?
Sorry for the belated reply. I just checked back on this comment thread.
Here is a citation and link to one of Ericsson’s paper:
http://graphics8.nytimes.com/images/blogs/freakonomics/pdf/DeliberatePractice%28PsychologicalReview%29.pdf
Page 370, The section of “Effort Constraint.”
Ericsson never said that you can get by without significant and extensive effort, only that the motivation to continue that effort is important for continued improvement, so it’s also critical to avoid fatigue and burn-out.