Learning from “Outliers”

One of the great lessons of trading is how little you know. You must constantly learn. I have to admit I didn’t quite understand what a credit swap was till recently. I was in an interview with a very bright young woman who explained to me what she did as a credit derivatives trader. I didn’t get the whole thing but I learned a little more. One of these days I will fully understand.

Often there are great lessons for us from non-trading books. Steve is always sending me interesting articles from all different sources. Be like him. You ought to read as much as can. You should read about companies. You should read about how companies make money. And how these companies are connected to other companies. But you should also just read.

Dr. Steenbarger wrote an excellent post the other day and referenced one of my favorite writers Malcolm Gladwell. I just love how Gladwell teaches us through interesting stories. I read his last work Outliers in a day. Mr. Gladwell offers us much to learn as a trader inside of Outliers. Let’s discuss what Mr. Gladwell can teach us as traders.

1) It takes 10,000 hours to master a topic. For you new traders who are struggling in your first few months please think about this. Do the math. If it is gonna take you that long to become a master of trading than the first few months should not be overvalued. Slow and steady wins the race.

2) Successful people work very hard. If you want to become a great trader you will have to put in the time. Just like almost every other successful person has had to do.

3) We can change. We have personality traits that may have just been handed down to us. If we recognize this then maybe we can change some of the ones that are not in our self interest.

4) Successful people all were given opportunities. Many believe that the next two trading years will be bountiful with opportunity. With the advent of new ETFs there are more opportunities for traders. Further with the ability to record our screens we can practice. Again more opportunities. This is all we can ask for.

5) Trading is meaningful work. Gladwell defines meaningful work as: “autonomy, complexity, and a connection between effort and reward.” Traders have autonomy to choose the stocks they trade and their entry and exit points. Trading is complex. And the harder you work the more you can make. Your upside is unlimited.

Happy holidays!

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