How to improve your trading | stockbee

6/09/2009

How to improve your trading

Here is a version of story I have heard in many training programs and used in some of my training programs: 

 

One day, an old leader manager with great reputation for building businesses , was invited to lecture on the topic of “Effective Management” in front of a group of senior executives representing the largest and  most successful companies.

Standing in front of this group of elite managers, who were willing to eagerly listen to his every word.  The  old leader  manager slowly met eyes with each manager, one by one, and finally said, “we are going to conduct a simple experiment”.

 

From under the table that stood between him and the listeners, he  pulled out a big glass jar and gently placed it in front of him. Next, he pulled out from under the table a bag of stones, each the size of a tennis ball, and placed the stones one by one in the jar. He did so until there was no room to add another stone in the jar.

 

Lifting his gaze to the managers, the leader  asked, “Is the jar full?” The managers replied, “Yes”. 

 

The leader paused for a moment, and replied, “Really?” Once again, he reached under the table and pulled out a bag full of pebbles.

 

Carefully, the leader poured the pebbles in and slightly rattled the jar, allowing the pebbles to slip through the larger stones, until they settled at the bottom. Again, he  lifted his gaze to his audience and asked, “Is the jar full?” At this point, the managers began to understand his intentions.

 

One replied, “no!” “Correct”, replied the old leader, now pulling out a bag of sand from under the table. Cautiously, he poured the sand into the jar. The sand filled up the spaces between the stones and the pebbles. Yet again, the leader r asked, “Is the jar full?” Without hesitation, the entire group of students replied in unison, “NO!” “Correct”, replied the leader.

 

And as was expected by the managers, the leader  reached for the pitcher of water that was on the table, and poured water in the jar until it was absolutely full. The leader now lifted his gaze once again and asked, “What great truth can we surmise from this experiment?” With his thoughts on the lecture topic, one manager quickly replied, “We learn that we can look at the jar as half full or half empty. Your attitude matters."” “No”, replied the leader.

Another  manager quickly replied, “We learn that as full as our schedules may appear, if we only increase our effort, it is always possible to add more meetings and tasks.” “No”, replied the professor. 

 

 

“The great truth that we can conclude from this experiment is: If we don’t put all the larger stones in the jar first, we will never be able to fit all of them later.” The auditorium fell silent, as every manager processed the significance of the leaders words in their entirety.

 

The old leader continued, “What are the large stones in your job? in your company ? in  your environment? Are you putting the large stones first or wasting time on small things?  ”

 

“What we must remember is that it is most important to move  the larger stones first . Get the larger issues right , because if we don’t do so, we are likely to make very little progress. If we give priority to the smaller things in life (pebbles & sand), our lives will be filled up with less important things, leaving little or no time for the things in our lives that are most important to us. Because of this, never forget to ask yourself, ‘What are the Large Stones in your Life?’ And once you identify them, be sure to put them first in your ‘Jar of Life’”.

 

With a warm wave of his hand, the leader  bid farewell to the managers, and slowly walked out of the room.

 

 

Same thing is true of trading. If you don't get the big stones in your trading jar first you can spend lot of time on small issues. What are the big issue in trading:
 
  • A well defined methodology based on key market insight
  • Vehicle Selection method: growth, momentum, value, voodoo
  • Time frame selection: Day trading, swing trading, position trading , macro trading
  • Trading mix: entry strategy, exit strategy, risk strategy
  • Software/ broker/ execution costs. 
Each of this is a big stone. If you get these right then other things are tactics. Some traders get it and some do not. Those who don't get it have issues beyond trading , they are not focused on trading or are trying to avoid making progress. So they continuously run after something very small. Or use distraction to avoid getting large stones in place. 
If you want to improve your trading get the large stones in first. 

1 comment:

james said...

This is an excellent post. thanks so much.