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The 38 steps to becoming a successful trader

  
Analysis, Education
  • We accumulate trading information – buying books, going to seminars and researching.
  • We begin to trade with our ‘new’ knowledge.
  • We consistently ‘donate’ and then realize we may need more knowledge or information.
  • We accumulate more information.
  • We switch the commodities we are currently following.
  • We go back into the market and trade with our ‘updated’ knowledge.
  • We get ‘beat up’ again and begin to lose some of our confidence. Fear starts setting in.
  • We start to listen to ‘outside news’ & other traders.
  • We go back into the market and continue to donate.
  • We switch commodities again.
  • We search for more trading information.
  • We go back into the market and continue to donate.
  • We get ‘overconfident’ & market humbles us.
  • We start to understand that trading success fully is going to take more time and more knowledge then we anticipated.
  • ————————–Many Traders Will Give up at this Point as they Realize Work is Involved————————————–
  • We get serious and start concentrating on learning a ‘real’ methodology.
  • We trade our methodology with some success, but realize that something is missing.
  • We begin to understand the need for having rules to apply our methodology.
  • We take a sabbatical from trading to develop and research our trading rules.
  • We start trading again, this time with rules and find some success, but overall we still hesitate when it comes time to execute. We start trading again, this time with rules and find some success, but overall we still hesitate when it comes time to execute.
  • We add, subtract and modify rules as we see a need to be more proficient with our rules.
  • We go back into the market and continue to donate. We go back into the market and continue to donate.
  • We start to take responsibility for our trading results as we understand that our success is in us, not the trade methodology.
  • We continue to trade and become more proficient with our methodology and our rules.
  • As we trade we still have a tendency to violate our rules and our results are erratic.
  • We know we are close.
  • We go back and research our rules.
  • We build the confidence in our rules and go back into the market and trade.
  • Our trading results are getting better, but we are still hesitating in executing our rules.
  • We now see the importance of following our rules as we see the results of our trades when we don’t follow them.
  • We begin to see that our lack of success is within us (a lack of discipline in following the rules because of some kind of fear) and we begin to work on knowing ourselves better.
  • We continue to trade and the market teaches us more and more about ourselves.
  • We master our methodology and trading rules.
  • We begin to consistently make money. We begin to consistently make money.
  • We get a little overconfident and the market humbles us.
  • We continue to learn our lessons.
  • We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and our trading account continues to grow as we increase our contract size.
  • We are making more money then we ever dreamed to be possible.
  • We go on with our lives and accomplish many of the goals we had always dreamed of.

Think it’s too late? The world’s greatest fund manager didn’t make money until he was 52

  
Analysis, Education
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Jim Simons had modest wealth at 52; now he’s worth $23 billion

Jim Simons
Financial markets — and risk taking in general — are largely the domain of the young. Early adulthood is the time to swing for the fences while middle age is a time for prudence, perhaps risking a manageable part of the nest egg.
Yet that’s not always true. It’s particularly untrue of some of the world’s greatest investors.
Among them is Jim Simons, the king of quants. Yesterday Gregory Zuckerman published “The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution.”
It details how a 40-year old math professor walked away from a job at Stony Brook University to try trading currencies. He had no idea what he was doing but raised $4 million with a few partners. He recruited renowned mathematicians to help him. It didn’t work and losses topped $1 million.
“If you make money, you feel like a genius,” he told a friend. “If you lose, you’re a dope.”
He gathered more data and persevered through the 1980s with a mixed record. In 1989 he lost 4%.
Finally, Simons along with recently recruited colleagues Henry Laufer and Elwyn Berlekamp, started to focus on short-term patterns — Monday’s price action often followed Friday’s, while Tuesday saw reversions to earlier trends.
It worked and the Medallion fund gained 55.9% in 1990. It hasn’t stopped. His fund as generated average returns of 66%, racking up gains of $100 billion. No other fund or manager is even close. A $10,000 investment 30 years ago excluding fees would be worth $40 billion today. Even after fees, it would be worth $195 million.
How the fund makes money is one of the world’s most-closely guarded secrets but it’s story isn’t. Simonds certainly had mathematical talents but he know almost nothing about markets when he started out at age 40 and managed to amass one of the world’s great fortunes.
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