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Becoming a Better Trader: Don't Compare Yourself With Others


Slow and steady wins the race: trading is a marathon and not a sprint.


The last rule I'll discuss in this series is not really a finite rule as it is a psychological understanding however I have found it commands the respect my other rules receive and is no less important.

There is a different sort of noise a trader or active investor must deal with, which is slightly different than most passive investors holding big blue chip stocks or quality mutual funds.

It is the noise that comes from hearing or reading about others successes. Combine this noise with the misconception that a trader is someone always on the move, betting vast sums of money and pulling in massive profits, and you have a dangerous recipe.

For me, it never fails. I will finish off a good week, month, quarter or even year feeling quite pleased with my returns and how I handled the market, and sure enough a Trader Monthly magazine lands on my desk telling me how some kid ten years younger than me made one trade, netting him a gazillion dollars. While I enjoy a nice dinner with my bride to celebrate a successful year, he will be sitting on his yacht in the south of France.

My thoughts immediately shift from being pleased with my steady and consistent outperformance to thoughts about what I could be doing different to make more money. Luckily, I know that these thoughts are very dangerous and rather than even consider heading down this path, I rid them quickly and remain focused on the simple fact that slow and steady wins the race and that trading is a marathon and not a sprint.

I truly believe that when a trader grasps this concept, his training can really begin. If someone looking to trade is always thinking that they should be making more and trying to swing for the fences, they will only be met with discouragement and frustration and more than likely be out of the trading game very quickly.

The rules that I have been sharing with you, when practiced and perfected, have the ability to keep you in the game and plugging along. It is this slow and methodical haul that sooner or later will result in great rewards, but one's expectations must be appropriate. When you feel yourself starting to be discouraged if you are reading or hearing about another's success, check that emotion at the door and stick to your game plan.

If you've missed any of Prof. Tatro's series, Becoming a Better Trader, you can catch up with the preceding columns here: Developing Your Personal Rules, Position Sizing, Let the Chart Be Your Guide, Legging In, Stops, Don't Fight the Tape and Play the Position, Not the P&L.

That doesn't mean, however, that you force yourself to be satisfied with mediocre performance year after year. Sure, there will be times when you underperform but as a trader you should possess a level of expectation that is better than the general market performance. Using your speed and flexibility should always keep you one step ahead and if these results are not being seen, I would recommend a serious introspection as to why. Some questions to consider would be:

Who are you learning to trade from? What specific style are you following? What are your rules and are you sticking with them? Where are you getting your stock ideas? Do you really enjoy trading?

Anyone who has read me for a while will tell you that I am a firm believer that anyone can be a successful trader if they so desire. Like anything worth something, it is not easy and takes dedication and hard work, but I have seen many people realize their financial dreams when they are placed on the right path. If you possess this desire, keep plugging along, find a great place to learn, keep those expectations in line and sooner rather than later you will be very pleased with your results.
No positions in stocks mentioned.

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