10,000 hours, 10 years, 10,000 trades

10,000 hours

A common theme that appears in Malcolm Gladwell's book - Outliers: The Story of Success - is this "10,000-Hour Rule".
 
We know it kind of intuitively don't we?

Hardcore gaming friends that that play Starcraft and CounterStrike day and night will beat the pants off us casual gamers.

The same it goes with billiards (here's looking at you coconut) or mahjong (and all you tai-tais out there).


Curiously, when it comes to investing or trading, retail investors and traders seem to suffer from the Lake Wobegon effect - we overestimate our abilities and underestimate the time and effort needed to learn our craft.


10 years

For a part-time retail investor, 10 years would be about right. 

Within this time frame, if we are lucky, we would have experienced 1 or 2 bull/bear cycles.

A lot of ideas, plans, strategies, tactics - learned from books, seminars, courses, etc - did we implement them?

Did we jump in with glee during the lows of 2003 and 2009? What happened to buy when there's blood on the street? Not so easy when some of the blood is ours! No?

Some say they are waiting to scoop bargains if STI goes to 2700 during this current phase of correction. 

Eh... If 2700 is "good value", did the same "investors" take some money off the table when STI was above 3400 last month during May 2013? How about anytime during year 2007?

The mistakes and lessons I've learned from the crash of year 2000 to 2003 and the subsequent bull market from 2003 to 2007 were very enlightening.

Most of it was an understanding of myself - my own temperament, my TRUE pain threshold, and my own emotions.

Whether I am more comfortable with "go with the trend" or am I suitable for contrarian plays.

Whether I am more a value (buy low; sell high), or whether I am more a growth (buy high; sell higher) investor. 

Some buy at 52 week lows; some buy at 52 week highs. Where I prefer to buy that's more important!!!

I've experienced euphoria and I've experienced capitulation. Now these emotions come in handy when I monitor market sentiments!

I guess I am now more discerning what I read and learn. I focus on what fits me. Must filter! Less on which guru said this or that. I make a real effort to listen to my own inner voice.  

But I guess that's normal. Like a singer, most of us start by emulating others; with the passage of time, we realise we need to develop our own voice if we want to be successful. 


10,000 trades

For retail traders, I think we are luckier in a morbid sense.

We get to learn about ourselves a lot quicker!

Most will get washed-out within 6 months. We quickly realise we don't have the temperament or mental strength to handle making multiple trades in succession.

Some have problem squeezing the trigger. Some cannot take the emotional upheavals, some just have unrealistic expectations on themselves or on the markets.

It's not that trading is "harder" than investing. It's just a simple phenomenon that in 6 months, we probably make more trades than an investor in 2 to 3 years!?

But once we survived our first 2 years, I guess we're on your way towards our first 10,000 trades and the resulting epiphany - on who we are as a trader, and our position in the market.

I've not reached my first 10,000 trades yet; but I am so looking forward towards it. I just hope my futures account will be a significant stake then to profit from my then epiphany!

Meanwhile, I just plod along on my tiny futures account (what I can afford to lose) and focus on discovering more about myself and the markets along the way.

And another "advantage" for trading is that we can try out different strategies and setups with quicker market feedback. For an investor, the feedback could be 5 or 10 years later when they belatedly discover a flavour of the decade investing style may not work... Ouch!