The biggest risk in any field of endeavor is becoming complacent. This is true in sports, business, education, politics, and especially in trading. A taste of success can be a very dangerous thing.
In the Beginning
When we begin trading, everything is new and exciting. With our limited experience, every book, blog, article, or webinar offers a plethora of valuable new insights. The learning curve is incredibly steep, but our progress is palpable. We soak up new ideas like a sponge, spending hours upon hours educating ourselves and honing our new craft. Sure, we make our share of trading blunders, but each mistake is a lesson that ultimately allows us to improve and refine our investment process.
A Taste of Success
Traders who don't learn from their mistakes either blow up their accounts or simply hemorrhage money for years, making the same mistakes over and over again. Unfortunately, traders who master the basics face a different kind of risk.
Our increased knowledge and experience makes it harder to find valuable new tools and insights. Every new book or article might only offer a single new pearl of wisdom, instead of dozens. The learning curve flattens out, and many traders are no longer willing to invest the time required to seek out new insights. They become complacent, relying on their existing tools and knowledge of the markets.
Experienced traders with hard-earned risk management skills may be able to subsist for years, eking out a living from the markets. But that is hardly a rewarding existence. Others aren't so lucky. They let their skills atrophy and eventually lose their trading edge.
A More Positive Approach
It doesn't have to end that way. Added experience also give us the requisite background and contextual knowledge to quickly evaluate, test, and implement new ideas and tools. Our increased account size means each new idea makes a larger contribution to our trading profits.
Furthermore, instead of assimilating new ideas, our extensive trading background now gives us the opportunity to pursue innovative new frontiers in trading and investing, which can be much more rewarding (psychologically and financially) than adopting new tools developed by other traders. We also have the opportunity to pass along some of our knowledge to new traders.
For me, that meant developing and teaching derivative courses for undergraduate finance and MBA students. After 30 plus years of trading and investment experience, it also meant developing new option analytical frameworks and sharing these approaches with other traders via my first two option books.
Continue to Learn
Helping other traders is a worthwhile goal, but we also have to retain our edge. Decades of trading experience do not guarantee ongoing success. Markets evolve and we must as well. The best insurance is continued education. That is the reason that I created the Recommended Reading section of Trader Edge. It contains a evolving list of my educational book recommendations, all of which I own in my personal trading library.
Technical Analysis of Stocks & Commodities
In addition to books, trading magazines offer a more diverse and timely supply of educational articles. I wrote several articles for Active Trader magazine, which unfortunately is no longer in publication. Active Trader was an excellent resource. I also read every issue of Technical Analysis of Stocks & Commodities (TASC) from cover to cover. It is one the most respected sources of technical articles and trading resources on the web. It is one of my primary sources of new trading ideas and has inspired a number of my proprietary indicators and trading strategies.
In addition to current articles, a TASC subscription also offers online access to the complete TASC digital archive from 1982 to present, optimized trading systems, and article code. TASC is a very valuable resource, which I highly recommend.
Disclaimer: I have a paid subscription to TASC, but TASC is also an affiliate of Trading Insights, LLC.
Conclusion
Even experienced traders must continue to learn. Not only will it increase your probability of continued success, challenging yourself is rewarding.
Print and Kindle Versions of Brian Johnson's 2nd Book are Available on Amazon
Print and Kindle Versions of Brian Johnson's 1st Book are Available on Amazon (35 5-Star Reviews)
Trader Edge Strategy E-Subscription Now Available: 20% ROR
The Trader Edge Asset Allocation Rotational (AAR) Strategy is a conservative, long-only, asset allocation strategy that rotates monthly among five large asset classes. The AAR strategy has generated annual returns of approximately 20% over the combined back and forward test period. Please use the above link to learn more about the AAR strategy.
Brian Johnson
Copyright 2015 - Trading Insights, LLC - All Rights Reserved.
