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Monday, 5 May 2014

10,000 hours versus 10,000 trades

I've just completed 9 months at my part-time retail sales job during the weekends (Sat & Sun)!

9 months may seem like a long time. But if we convert it to the hours my full-time colleagues are working 6 days a week, my 9 months is "only" 3 months from full-time perspective.

Would there be a change in expectations of my competence if you are a customer or my boss now?

When I conduct recruitment interviews, I always try to find out if the candidate with 10 years working experience in a company is really 1st year experience times 10 (holding the same job for 10 years!!!???) or has the candidate been rotated across a few departments with varied job responsibilities or roles during that 10 years in the same company.

Does it make a difference? You tell me.



The secret to making money in the markets is to buy low and sell high (when shorting it's the reverse) - that everyone knows. It doesn't matter whether you call it investing or trading.

(Of course there are other variations like buy high sell higher. That's for advanced demi-gods)

I sincerely hope you didn't have to pay for a course or seminar to find this out. If yes, you may want to take a step back and ask yourself should feeble-brained people be allowed in the markets... (Yes! The more the merrier if you are the carnivore taking the opposite side of their positions)
 
Those who subscribed to Malcolm Gladwell's 10,000 hours rule in his book the Outliers may nod your heads in agreement that your current corporate or academic success is due to practice, practice, practice.  

If you have 10 years or more experience in your investing or trading journey, now ask yourself: Did you put in the same amount of hours like in your day job or studies?

Let's do the math:

10,000 hours divide by 10 years = 1,000 hours per year

1,000 hours divide by 52 weeks = 19.2 hours per week

19.2 hours divide by 7 days = 2.7 hours per day

Did you put in average 19 hours per week or 3 hours per day to your "passion" in investing or trading? I thought so too.

Hence most prefer to "outsource" their decision making (paid subscription services) or rely on tips from brokers or anonymous strangers in forums. 

(Alert readers will know I am being nice by using 10 years. If your current investing/trading journey is less than 5 years... Unless of course if you are genius or President Scholar material. Your 1 year is equivalent to other people's 10 years)



Would you agree that buy low sell high is all about entries and exits?

If a long term investor makes a buy decision once a year and a sell decision once in a decade, how would this same investor stand against a trader who has made 10,000 trades (round trip entry and exit) ?

Just make a wild guess who is more likely to buy low, sell high?


Not convinced? 

Girls, if you put on make-up only on special occasions, can you out-doll those gals who put on make-up everyday?

Men, if you are a occasional drinker, can you out-drink those drunkards who drink every freaking night?


  

 

66 comments:

  1. Either way should be at the level or near the level of experts.

    ReplyDelete
    Replies
    1. CW,

      For each modern Western nuggets of "wisdom", there's a much earlier Chinese equivalent:

      10 minutes up on stage; 10 years sweat and tears backstage.


      How did China with 5,000 years of passed-down knowledge and wisdom could become the sick man of Asia 100 years ago?

      Too much respect and adherence to the old way of doing things?

      Hmm, I think I may write a new post titled "Not to trust anyone over 40" to counteract the poison of this post.

      Now that's mind fxxxing myself!?

      Delete
  2. entry and exit are not important to a trader!

    ReplyDelete
    Replies
    1. if it is so important, then there will be no winner in the market place.

      Delete
    2. Got one book written on Entries and Exits for traders

      Delete
    3. not that fortune teller again!

      Delete
    4. coconut,

      Pray tell what are important to a trader besides buy/sell?

      Delete
    5. enter and exit we must being a trader, not where but when.

      where is where you decide, when is where you don't decide, you depend.

      Delete
    6. most trader lost becos they decide where to enter and exit! and usually those who don't want to take a lost will lose big time.

      Delete
    7. so entry and exit level should be the least important in decision making for a trade.

      Delete
    8. coconut,

      OK... I don't comprehend; it's cool, I'm just an equities man-whore.


      Tuan-tuan dan puan-puan,

      Today is your lucky day!

      Above is the language of demi-gods or Jedi Master.;)

      Delete
    9. no la, haha i write like that becos i'm watching world snooker champion ship final! replay.

      tonight live at 9pm! got to go.

      Delete
    10. oh oh, when to take profit is as important as when to cut losses, not where!

      Delete
    11. coconut,

      OK, I don't tease you anymore. You go enjoy your snooker!

      I'll translate for you ;)



      Ladies and gentlemen,

      What our esteem snooker hustler cum home dungeon-based trader meant is:

      You let the market tell you WHEN to take profit, and WHEN to cut losses. You don't plan in advance; you react to what the market signals to you. It's like the no mind concept of Zen. (OK, I think I've just lost you, LOL!)

      This is in contrast to "investors" who have a pre-determined WHERE buying plan like:

      Buy X% if STI hits 3,000, buy another Y% if STI hits 2,700, and Z% if STI hits 2,400. What happens if STI goes below 900 like in 97? Oh! It will not happen, that's a 1 in 100 years event...

      Sounds familiar like that 1 in 50 years flooding comment hor? Then it pours and pours... And pours some more...

      Be humble; we don't tell the heavens what to do.


      Footnote:

      coconut is systematic trader. He got no screws in his head, so he does not think. Lucky him! His software trades for him.

      I use discretionary price action (old name tape reading). I still think too much.... That's why I do meditation... No mind. Ummmm...... I got one screw loose though.


      Psst... Between you and me, we are still talking about exits and entries ;) Don't tell coconut. Shh.....

      Delete
  3. Hi SMOL,

    Totally unrelated to finance. I'm curious as to what prompted you to work PT and in what type of retail?

    Cheers!
    Derek

    ReplyDelete
    Replies
    1. Derek,

      You may want to check out this old post and it's comment about my move to weekend work:

      http://singaporemanofleisure.blogspot.sg/2013/08/ive-gone-full-circle-after-30-years.html


      Saturdays and Sundays now are my days of "rest". My other sibling takes over in keeping mom company ;)

      It's a normal retail job at Orchard Road at a small showroom. I do wear a name tag, so if you run into me, say hello!

      Would it be too cheesy if I say it's part of my Zen training to see if I can really "stretch and coil like mancho man"? LOL!



      Delete
    2. Casual readers,

      You may want to read the same link I showed Derek if you interested to know more about coconut's and my past.

      Don't worry, I have no "ang kong" on my back; I not sure about coconut though... He "tit toh" at Geyland one.

      Although Queenstown Tanglin Halt and Mei Ling street in the 70s have no lack of "black flags". Not far away we got Redhill and Bukit Ho Swee "numeral" societies ;)

      Delete
    3. Any hint on which section of Orchard and let readers go and peek?

      Delete
    4. CW,

      Orchard Road not that big lah!

      Shui yuan ba ;)


      By the way, I not Jia Jia or Kai Kai. What peek!? $#$$&!!$@

      I'm always thirsty. Treat me coffee and you can call me Al!
      (It's a Paul Simon song)

      (Younger readers must be catching no ball when it comes to me talking the lingo of our generation. LOL!)

      Delete
    5. waye! i got no tattoo la, i'm the most lovable guy around....

      think this way, if you are all out for money, you will be blur by the price action once you are in a trade, and so as your exit point. you are trading for money and not for the trade, especially when your entry point keep flowting in your mind and affacting your decision for exit.

      thats bad trading.

      Delete
    6. Sorli sorli.

      Forgot you are that lovable Hello Kitty with 2 half-coconuts! (By the way, is Hello Kitty male or female?)


      Professional traders and gamblers do the same thing:

      We never count our money, when we're sitting at the table.

      There's time enough for counting, when the dealing is done ;)


      Trade the tape!

      Delete
  4. But SMOL, for 10,000 trades need to pay vampires... urm i mean brokers $300,000 leh. Thats a lot of sinking cost. By that time, you can look for me using submarine already.

    ReplyDelete
    Replies
    1. my commission alone cost more than 10k a month, maybe 20k. not yet count the financing cost and others.

      its common for a pro to have commission like that.

      Delete
    2. and brokers are not vampires.

      Delete
    3. i'm more like a vampires haha, or some might like to use "mosqito". use whatever you want, they are still part of the ego system.

      Delete
    4. ckw-I99,

      If we want to build up our chest and biceps, doing 1 push-up a day will only get us so far... 3 sets of 30 push-ups per day will bring more results.

      And if we want more bulk, dumb-bells, protein mix, etc DO cost extra money. So do we want muscles or not? This is another example of the limitations of goal setting if we not clear on what we want in the first place.


      By the way, this post is not about encouraging people to make 10,000 trades. Its to show what happens if you bring a knife to a gun fight. (It's funny how we read what we want to read)

      Professional traders would NEVER pay retail commissions for a trade. They are even more conscious of the true trading costs factoring slippage, bid/offer spreads, margin interests, and other costs most retail don't even care about.

      Just ask your broker how much they pay for making an equity trade for their own account and you'll know the edge they have over you the client.

      Having said that, the lower trading cost structure of CFDs have narrowed the gap for retail. I better stop since this is a leverage and over-the-counter product that is more suitable for advanced retail traders.

      Delete
    5. the devils are in the details!

      in long term investment, from the surface it can only beats inflation. in trading, on the surface its a 50/50 bets less commission. its a negative sum game!

      its like gold mining, you just can't dig out the soul, you must know how to refine them.

      Delete
    6. to refine those gold, you probably need more equipment than you ever think, and the process.

      in trading, those equipments are the trades themselves. and they come with a cost.

      Delete
    7. for the majority traders, they are like treasure hunting, looking from the surface and hope they will fine a big rock of gold.

      for the pro, they are the gold miner looking deep under ground.

      Delete
    8. coconut!

      You analogy is so much better than mine!!!

      Touche! Bagus! Hao! Shui!

      It's a bit like I want to be entrepreneur, but I want to avoid rental, staff costs, preferably no inventory thank you very much!

      Delete
    9. ofcos i can haha, i was a gold hunter before and i even seaching for that "gold mountain" full of gold to pick.

      there is a big different between now and then, especially the mind set.

      Delete
    10. lucky for me once i'm a gold miner, i would not want to be a gold hunter ever again.

      not that the gold miner cannot go bankrupt, they certainly can! but its a lot easier to make a living out of it, to survive in the market place.

      Delete
    11. the landscape of gold mining in trading is everywhere, there is no territory dispute, whoever interested can joint in the fun. the big institutions, the flash boys, any individual also can.

      you can dig or search the same place as i did or you think you can find them where the institution just dig, by all means go ahead. there is no boundary, just bring your tools with you.

      but mind you, especially those who just hunt for ready gold, i seen many inexperience one got fall into the sink hole or soft ground and get buried alive!

      Delete
    12. or got crash by the bulldolser that the institution are using, they are everywhere too.

      me? no worry, i'm only using the chunko and a pile.

      Delete
  5. To traders wannebe,

    For those interested in knowing what are the true costs in professional trading for a living, just attend those recruitment drives by some of our local brokerages for remisiers and/or independent traders.

    For both remisiers and independent traders, you'll need to generate at least 2-3K in commissions per month to retain your "seat" at their trading desks.

    Minimum capital around 50K - that's bare-bone minimum. Preferably more better. It's a business! Not a masak-masak hobby.

    They'll probably close an eye for the first 2 years (learning curve mah). But after 2 years, if you don't meet the cut, well, at least you've tried! No regrets!

    Now that's the best way to know whether you have it in you or not. Trading your own money still can get fired!?

    Stick with part-time retail "investing". There only so much rejections a person can take in life....

    ReplyDelete
    Replies
    1. the real cost of trading is our ego or pride, thats the most expensive one.

      i'm very competitive in nature, both against others and myself. i pay a very high price for it.

      Delete
    2. not until you learn how to lose money on a mental state can you be consistence in your trading.

      the big successful traders are also big loser.

      Delete
    3. smol, have you visited fat lately? looks like he has new loban, very much like gold mining operation also.

      go ask him.

      Delete
    4. finally finally waited for so bloody long, my favourate song now on youtube!

      何處是歸程-洪 鐘

      http://www.youtube.com/watch?v=dR3PI-TCdm0

      Delete
    5. coconut,

      1) "the real cost of trading is our ego or pride, that's the most expensive one."

      This statement should be pasted on the PC screens of all traders! Your gem of wisdom got fight with Paul Tudor Jones's "Losers average losers"!


      2. I do visit Fat's blog from time to time. I wish him well.


      3. Wow, a blast from the past ;)

      Delete
    6. haha, don't believe him when he say "my daily meal"! he has more than require to retire!

      what daily meal haha....

      Delete
  6. Wow, SMOL,

    U and coconut exchanges sure is enlightening.

    I am quite sure I am not a hunter or miner wannabe. I think I will make do with being a farmer. More Eco friendly, who knows, as I expand my ploughing field, maybe one day I will "clack" similai eh? Wow. Gold!!

    LOL, dream on rite... Just hope the storm dun come and destroyed the bean sprout I planted.

    Hmm... Doesn't really matter, since I am a weekend farmer only.

    ReplyDelete
    Replies
    1. oh yes i agree!

      trading is like gambling, unless you die die also must trade (gamble), then learn to be a pro at it.

      stick to CW (investing).

      Delete
    2. how about planting some durian?

      Delete
  7. Hmm ... Why durians? Not coconuts ? Coconut husks also can used.
    LOL
    Durians dangerous lei.

    ReplyDelete
    Replies
    1. nonsense, i almost got hit by fallen coconut before! but never heard people got kill by durian.

      Delete
  8. Special thanks to ckw-I99, silly investor, and all others who take the trouble of poking, challenge, debate, question, and tease my posts.

    Without the catalyst from ckw-I99, we would not have the privilege of witnessing coconut's deeper understanding of our TRUE trading costs.

    If this was Zen combat, I would have walked away rubbing my bald head with a impish grin - I the grasshopper have just been crushed by a coconut....

    I've RECEIVED so much from blogging :)

    ReplyDelete
    Replies
    1. why talk like that, we just casual talk only, i share my experience, so as others.

      so, quit trading?

      you know, now i have a bigger headach! my snooker kaki now keep paster me to "teach" him how to make money trading, he is to retire in a few years and going to receive a big sum from his CPF.

      i did not reject him outright but knowing him well, i keep hinting to him its not going to work long term but he keep insisting he can.

      what can i do?

      Delete
    2. coconut,

      Must give compliment when compliment is due mah.

      Charge your friend $3,000 per hour for personalised coaching and he will leave you alone.

      In the event he's one of those greater fools, show your $300,000K losses and see if he still has stomach for it.

      If still don't give up, well, $3,000 per hour is not bad kopi money. Don't take white don't take. Just be prepared to lose this friend though...

      Delete
    3. charge my friend? i'll never do it.

      i already show him how i trade, he took day off just to come to my house a few times. i even show him my spread sheet which is the soul of my trading. i also explain in details how to control risk and take a position. in fact i told him everything i know.

      he is a very smart guy and know the capital required to operate but he seems to be lacking interest in price movement and their relationship. i also gave him a project to come out with a plan how the black jack card counting pro did their business, how they operate in groups and how they manage risk.

      nothing came out!

      Delete
    4. frankly, just from the surface i can tell whether he can or cannot!

      Delete
    5. coconut,

      There you go.

      It's like me only interested in the eating part; learn to cook myself? Nah!

      That's what this post is about:

      "Investors" not willing to put in the required 10,000 hours.

      "Traders" not willing to pay-up for the 10,000 trades required.

      Delete
    6. my friend has trading experience in stocks and he own some stocks as well, so he is not new. he also understood spread and option trading.

      what struck me was no matter how i explan, he seems to don't get the idea of risk control, why it should be done in this particular way and why is it so important.

      is like he keep saying, why use the overhead bright so troblesome, got traffic light what and insist he is right.

      he also has a big ego problem like me haha...

      Delete
    7. in trading, is not like cooking, you can get food poisioning and die!

      thats one thing i never do, trades other people's money, not even my parant's money.

      Delete
  9. wa.. coconut,

    “i also gave him a project to come out with a plan how the black jack card counting pro did their business, how they operate in groups and how they manage risk.”

    super sound like syndicate trading lei.. Scary... I go plant durian trees...

    ReplyDelete
    Replies
    1. if you don't know how to get an edge, how to make money? you mean you don't have a clue what i talking all this time?

      yes, even i'm not a black jack pro, but i do know exactly how they make money, its all about an edge with risk control.

      exactly same as my trading.

      Delete
    2. mistaken identity haha, i though it was smol but its sillyinvestor....

      Delete
    3. sillyinvestor, what syndicate? have you heard of "computer"?

      Delete
  10. alamak, syndicate also used computer la, syndicate is the mode of operation, not tool.
    bookie used pen and paper, put small slips of paper under the utility tap to be collected by another, that is also syndicate.
    farmer used logarithm to figure which plot of land to plant what and when to harvest and replant is still a farmer

    ReplyDelete
    Replies
    1. but if one man operation can be call syndicate, then probably you are right.

      Delete
  11. Coconut,

    Just a poke, dun get so uptight. I am a outsider, I used the word "sound like", not implying anything.

    Chill

    ReplyDelete
    Replies
    1. not at all, i just talk very straight forward.

      we now have computer to do all the calculations and best of all we can sent our orders in multiple way through the internet at one go. no need all the runners and brokers and so on, so one man can do the job of a "syndicate".

      well you probably right but syndicate sound dark and evil haha....

      Delete
  12. coconut,

    As a facilitator and trainer, I've seen my share of participants that are like your friend.

    Your friend's cup is already full. There nothing we can do.

    He just want a kicking dog to blame in case he bust out - you "taught" him what!?

    ReplyDelete
    Replies
    1. i know my friend well, we know each other for more than 30 years! he would not blame me, he know its risky and he is a gambler haha, meaning he know how to handle losses.

      as a close friend of mine, i don't want to see him lost his saving from gambling and trading. i told him even he can step by step follow me, its going to be very difficult. and if he going to trade, i have to stand behind him just to make sure. he is as old as me my friend.

      i don't have many friends, those i have i treasure them a lot, will work out something when times come, or hopefully he'll forget about it haha...

      Delete

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