For a lot of people, the key to achieving durable success in the markets has to do with hard work, focus, persistence, courage… but I’m here to tell that these are all by-products of something else — something much more powerful that we can all develop. It is this very special something that is essential for building any new skill. In fact, it is a critical factor in trading success and in any other performance-based field.
To better unpack my ideas on this, consider this: I love Germany! I love the people there, the history, the food, the beers… I’ve traveled there countless times, sometimes for lengthy periods, and each and every time I’ve enjoyed myself thoroughly.
I also love the language. For reasons that escape me, German sounds incredibly pleasant to my ears. But still, I never really learned it. And the reason, now, seems more and more apparent. Being the introvert that I am, I am usually in my little bubble. I don’t necessarily go towards people and engage in conversations. It’s not that I am antisocial, I’m just reserved.
With enough perspective, I now understand how this personality trait of mine has been detrimental to my learning of the language. It has impeded on my capacity to involve myself, create connections, and by the same token, learn new things. In other words, the lack of engagement made it impossible for me to learn German!
The importance of engagement
Real learning happens when we are engaged in something! For instance, even though I’ve traveled many times to Germany, it was never enough to learn the language. It was never enough to hear German on TV, on the radio, all around me — on the train, in restaurants, and other public places. While I got used to some words here and there, I never developed an ability to speak the language because I lacked engagement.
Engagement is the driving force behind success. It is that which makes us learn, build skills, and gives us results. And the principle is the same for any given skill, in any given field – and that includes trading.
It can be easy to assume that the gap between where you are now as a trader, and where you want to be in the future, is caused by a lack of knowledge. The presupposition is that if we knew about a better strategy or a better risk management technique, then we would get better results. We believe that good results require new knowledge.
This is true only to a certain extent! You see, what I realized is that new knowledge does not necessarily drive good results. In fact, constantly educating yourself about the ins and outs of financial markets; buying courses, reading books, all these things don’t make you a better trader. All they do is increase your knowledge of financial markets. Knowledge doesn’t necessarily equate to results, just like knowing how to drive a car in theory doesn’t equate driving it in practice. Again, engagement is what creates results!
“Information isn’t what’s scarce; it’s the willingness to do something with it.” Tyler Cowen
A good trader is not necessarily a financial expert. A good trader is someone who is proficient at placing and managing trades – which can, but doesn’t have to, entail in-depth knowledge of financial markets and the economy. If you just collect trading books and hang out in online trading groups without putting your knowledge into practice in live trading, you’re doing yourself a great disservice. Trust me, I have to fight this urge all the time.
If your goal is to become a better trader and not simply gain additional knowledge, too much theory can actually be a grotesque misuse of your time. You’ve got to create engagement!
How to create engagement
⦿ Devise a methodology that has been proven to work
⦿ Put enough money on your trading account so as to give yourself a fair chance
⦿ Take every signal that your system identifies — or as many as you can. Don’t spare in weighing, judging, doubting… just do it!
⦿Make sure to keep your risk per trade small. This will allow you to place lots of small trades. This is a prerequisite for engagement — you have to trade small enough so as not to make ruin a feasible outcome for you
⦿Record everything in your journal and learn from the mistakes you will undoubtedly make
⦿ I’m not saying that you should place trades outside of your proven methodology and shoot at everything that moves.
⦿ I’m not saying that you should stay glued to your screen hawking each and every opportunity
Here’s what I’m saying…
⦿ The more signals you take, the better! Overtrading doesn’t exist for someone who trades a proven methodology. But try to bring some structure to your way of trading so that you don’t spend all your time doing just that. For instance, I don’t trade for more than 2 hours per day – that includes, placing and managing trades.
⦿ When you trade a proven system, every signal you get is worth taking. Therefore, engagement will allow you to learn faster than the masses who think they should be waiting for the perfect trade. That trade might ultimately come but without the appropriate skills to place and manage that trade, it’s a futile endeavor. You see, any amateur surfer out there can wait for that perfect wave, but only the pro knows how to ride it. In the meantime, while the masses are waiting for their perfect trade, you are building your capacity, trade after trade, to act in your best interest. You are building skills and you are learning how to be a trader — a real one, not a wannabe.
⦿ Engagement creates courage and confidence — these traits, when transformed into a habit, are very powerful!
⦿ Engagement creates opportunities. The more you trade, the more the likelihood of being at the right place and at the right time. You are not nitpicking anymore – you are there, available, and ready!
⦿ Engagement lowers your expectations and allows you to manage your trades with little emotional involvement. Because there’s always the next one. And the one after! For that same reason, you are also less prone to being disappointed if a trade doesn’t work in your favor.
⦿ Engagement will help reduce the significance of a bigger losing trade.
Engagement is the solution and the cure to our predicaments as traders. It shapes mastery insofar as we allow ourselves to fall, to fail, and to learn. In other words, there is a strong connection between engagement, expertise, and success, and that connection is more direct than most people suppose. By creating engagement, step by step, action by action, we dismantle the obstacles in front of us. And with persistence and flexibility, slowly our actions become more in line with our goals.
[This post was written in its entirety on my iPhone while I was waiting for my Flight to Paris at Frankfurt International airport. I hope it makes sense to you, and if not, I will clarify further in the comment section. And if need be, I’ll add an addendum.]