Nov 092010
 

October marked two major milestones for me.  The first I already wrote about in Part 7 was 1 year of profitability swing trading ES.  The second milestone was 6 months profitability day trading ES and that’s the focus of this post.

Getting to 6 months profitability took me 2.5 years.  Unfortunately most of the first 2 years was not very efficient as I spent lots of time on automated trading systems (that never worked more than a few months), indicators, multiple timeframes, setups that I found in forums & online, a trading coach who was a scam, etc.  In January I started trading full time and that’s when I took several months “off” of trading in order to educate myself in topics such as market profile, support & resistance, order flow, etc.  I believe one can get to profitability much quicker if they do not waste time like I did but that’s easier said then done.  There is still a lot of screen time required and there are no shortcuts for that.

In Outliers: The Story of Success Malcom Gladwell explains the 10,000 hour rule.  The rule basically says that in order to master something it takes 10,000 hours.  He gives lots of examples from athletes to computer programmers and the magical number of 10,000 kept coming up.  He is the first, as far as I know, to quantify something trader’s have known for a while.  Traders call it “screen time”.

While it’s impossible to calculate exactly how many hours I’ve been trading, I can estimate it at approximately 50 hours/week.  I actually think my average is a higher than that as I work on trading in the evenings & weekends and for a long time I dreamt about trading most nights.  I must admit I was totally consumed by it.   And when I read Outliers I realized that this was not only normal, it was what is required to make it to the top.  So 50 hours/week * 48 weeks/year * 2.5 years = 6,000 hours.  I started becoming profitable daytrading after 6,000 hours.

I remember when I moved to France and started my first job (first in France) working for an internet start-up.  I had the great fortune of working with an outstanding developer/architect who was much better than I was, despite us having about the same age.  I learned so much from him it was amazing.  When the day was over I’d go home and explore Paris with my new French girlfriend.  On the weekends my girlfriend & I would visit Paris and do stuff.  On Monday morning I’d come in and my coworker would show me what he had done over the weekend.  I’d ask him how & when he did it and he told me he was programming pretty much around the clock.  He would sit on the couch with his wife and program on his notebook computer while she watched TV.  And it was then that I realized that I could never compete with him.  I just couldn’t keep up.  It didn’t matter who was “better” or “smarter”, what mattered was that for every hour of experience I got, he got 2.

I really appreciated working with him.  It was a true honor.  I learned so much.  Unfortunately our start-up went bust and we both moved on.  I ended up working as a consultant for a few different companies.  I kept learning and I did great work and put in place lots of processes & new technologies that have remained long after I had left each project.  But nothing extravagant.  If you asked someone about my professional work, you’d probably hear good things about me but probably nothing spectacular.

My former coworker, however, went on to write several books, join the elite Apache open-source team, created several Apache open-source projects used by thousands of people all over the world, gave presentations at key industry events in various countries, … I could go on and on but the guy is one of the best.

What’s amazing from this story is that 10 years ago we were both very close in knowledge & skills.  He was better than I, no doubt about that, but I could keep up with him.   But for every hour of experience I got, he got at least 2.  So 10 years * 45 weeks/year * 40 hours/week = 18,000 hours.  So while I got 18,000 hours over the past 10 years, he got 36,000!  It wasn’t work for him because he truly enjoyed every minute of it.  It was his passion and that is what makes someone “World Class”.

Now let’s relate this to trading.  Is trading your passion?  Are you on track to be world class?  Because in trading you’re competing against world class traders.  Traders who will put in more time than you, work harder than you, and who are smart than you, and who are just better than you period.

With 6 months profitability daytrading I think this first journey is complete.  I told my wife last night “I don’t think I need to work evenings and weekends any more.”  I’ve done that for almost 3 years now.  But when one journey ends, a new one begins.  This new journey will take me from a 1-2 lot trader to a 100 lot trader.

To find out how the next year went, see A look back on my journey – One year later.

 

  8 Responses to “A look back on my journey – Part 10 – Epilogue – A look at success & the new journey begins”

  1. Keep on going, it’s a marathon. Anyway, I think you will work on your trading over weekends – at least for some hours.
    I prefer not to trade more than 6 hours a day and spend the rest of the time with research, sports, people and cultural stuff.

    Cheers,
    Markus

  2. I’m usually the first one up on weekends so I don’t mind doing a bit of work. But I’ve sacrificed a lot of things the past 3 years and it’s time to start doing other things. my first goal is getting caught up around the house. I have a lot of projects I’ve been delaying.

    Lately I try to trade 2.5 hours in the morning, 3 in the afternoon, and then 1 hour in the evening that makes 6.5 which is close to your 6. Seems about right. I’ve been working on a programming project when not trading but that’s almost finished.

  3. Thanks for the comments.

    I can relate.

    I’ve just recently started following you here. (on BMT for a while)
    Your words are and inspiration in my journey to become a full-time trader also.

    Scotte

  4. I wish you luck with your journey Scotte. It’s always exciting to start a new journey. I got thrown into full time trading by chance – my client didn’t renew my contract. But it was the best thing for my trading. So I wish you luck with that as well. It’s hard to leave the comfort of a paycheck.

  5. Inspirational post with some hard facts thrown in…nice !!

  6. Actually forgot to ask. You mentioned a coach who turned out to be a scam unfortunately. But if someone is coached by a real professional trader/mentor, do you think the 10,000 hours would be a reduced number ?

  7. ^ 10,000 hours is certainly NOT a prerequisite for successful trading or expertise or whathaveyou. Not sure where Gladwell pulled that figure out from… You’ll need a lot of time, yes, but it’s about quality not quantity – a lot of hours (probably most) are spent finding out what doesn’t work and going down the wrong paths. If you for whatever reason were to start in the correct location and go down the correct path from the beginning, your journey’s time would be greatly reduced.

  8. Amarjit – I think having a real trader teach you would reduce the learning curve drastically. That’s the idea behind the prop firms. But be careful, prop firms are selective and lots of companies offer “prop firm training” or “mentorship” but you have to pay for it, and unfortunately most of these are not very helpful. Finding a trader who really trades and is profitable that is willing to teach you is not easy. Over the internet people play all kinds of tricks like not showing their DOM, trading on sim, not trading at all, etc. I plan to write more about this in the future.

    Michael S – The 10k hour rule isn’t about logging hours and being an expert when 10k is reached. The real message is that being a expert and mastering a discipline takes a long time which equates to lots of practice. If you want to know where he came up with that then you have to read the book. 😉

    As I wrote, I started becoming profitable daytrading after approximately 6k hours. But I haven’t mastered it yet. Far from it. I still make mistakes and my income is relatively small compared to what I made consulting. I agree that if one starts in the right direction it can be reduced, but I’ve learned that a lot of trading involves discretion and that takes a while to develop.

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