On the bookshelf behind my chair are a series of binders, one of which is labeled Tim's Trading Tome. It is thick with articles and charts, and at the very front is a lined sheet of paper on which I wrote the following last Autumn. This is the entire entry, and I've boldfaced a couple of key items for emphasis.
"There will be economic depression and deflation bottoming ~2014-2016. As of late October 2008, "A" wave is near an end and strong "B" is imminent. Ideally, the market will ascend to former failure levels. If the market ascends that much, it will create the shorting opportunity of a lifetime with a "C" wave that should crush past 2008 lows. The key thing will be patience to wait for the completion of "B". It will be hard."
Now, ten months later, I still subscribe to this thesis. I was early calling for the bottom of the market in October – – it had another, slightly lower, bottom in March. But I was certainly right with "It will be hard" – – dealing with the past five months has been exceedingly hard.
But in today's all-text post, I wanted to make a point that is very important to me: there is no holy grail for traders. I've been doing this a long time, and I've been exposed to a lot of different products, methods, techniques, and trading dispositions. There isn't a single method which is a surefire way to make money. Not one.
My philosophy on trading has this important premise: it's all about your relationship between yourself and the market. The market, you cannot control. Yourself – – to a degree – – you can. And it is the complexity of yourself vis a vis an ever-changing market which makes the entire enterprise of being a trader simultaneously fascinating, exasperating, and thought-provoking.
As the old saying goes, you never step into the same stream twice. It is the same with the markets. They are ever-changing, particularly in the present time, and there isn't a magic bullet out there which is going to let you nail profits month after month, year after year.
There was a time, particularly last year, when I thought I could find such a thing. I was open-minded about just about anything: I would gladly look at astrological cycles, numerology, and a variety of obscure techniques for ascertaining market turning points.
Some of them worked. Most of them didn't. But instead of latching on to one particular method, I have, over the years, adopted a handful of methods, and I've put them into my own unique trading stew. I am refinining it all the time – – weighting some "vectors" I am monitoring more, weighting some less. But the concoction is best suited for me and who I am. It wouldn't work as well for most other people.
It's important to embrace one's perpetual ignorance. I seek mastery by considering myself a dunce who is in search of knowledge. By no means am I suggesting piling on rule after rule, method after method. I view the act of trading not much different than making an ongoing series of bread loaves. I'm changing the recipe a little each time, and I'm kneading, kneading, kneading the dough (that is, my positions, their weighting, and their stops) in order to try to get the result I'm after. Metaphorically, a delicious loaf of bread; realistically, a nice, outsized profit.
The fact that learning to be a great trader is a very personal journey is very much why I stopped buying business books many years ago. When I was in my late teens and early twenties, I bought business books all the time. I figured they would help me become a more successful business person. They didn't.
I've got shelves of these books, and I don't think I learned a thing from any of them. It's not because I didn't read them carefully. But the fact is that most "how to" books are based on the notion that If You Do What This Person Did, You Will Be Like This Person. But you know what? That person is that person. He isn't you. And the circumstances he found himself in (whether he's Jack Welch, Tom Peters, Steve Jobs, Mark Zuckerberg, or God-knows-who-else) are unique to that person. If you want to read a biography, great – read a biography. But if you want to be like that person – well – that's spot already been taken.
This isn't to say there's nothing to learn from books. But I think books related to business or trading are best applied to either (1) the actual mechanics of trading techniques and their application; and (2) learning from the successes and failures of others in order to "template" those events to your own personal experience. That's why I found the Paul Tudor Jones videos so electrifying. I don't have any illusions that I'm going to be a Paul Tudor Jones. But I do draw inspiration from his resilience in the face of defeat and his successful use of past markets to present ones.
If you're read this far, and you're feeling philosophical, read this essay by Seneca on The Shortness of Life. We should be humbled at how wise our distant ancestors were.