One aspect of being a trader that is simultaneously appealing and nerve-wracking is that the results a trader generates are just about the purest reflection of whatever talent they might have. In other words, the talent is almost perfectly correlated with the result.
This is not the case with most other endeavors. Let's say you are a 5th grade school teacher. You have certain talents that are germane to the job – – patience, discipline, knowledge, a rapport with young people, a rapport with their parents, the ability to wake up and get to school on time, and so forth. There are dozens of attributes which factor into your potential success in that occupation.
How does one measure the result? That's a tough question right there – it could be measured by the change in test scores from the start of the year to the end; or by the relative performance of that class versus similarly-aged classes in the same school; or by the results of a satisfaction survey that the students fill out; or a similar survey by the parents. As you can see, even defining "success" in this occupation is very hard.
Similar challenges would be seen in being a lawyer, a dentist, or a bricklayer.
In addition, what happens between "input" (skills) and "output" (results) is subject to the interaction of the person with the environment. In the case of the teacher, the "environment" is mainly the students and the school's culture; for a lawyer, it would be clients and co-workers; for a bricklayer, it would be the job site, the tools he has, and other sub-contractors.
But the perception of the success in any given occupation can by fudged quite a bit. You can be a lousy Congressman but still seem quite competent and get elected repeatedly. You can be a crummy teacher but thrive simply because your students like how permissive you are.
A trader, though, really just has one asset: his or her ability to apply their "edge", whatever it might be, in the never-ending turmoil that represents a given market. Their edge might be in the form of skillful charting, insightful fundamental analysis, a deep understanding of a certain industry, or – – as in recent newspaper headlines – – a broad network of contacts of non-public, material information.
But since a trader's measurement of success is simple – – their profit/loss statement – – there's no "fudge" allowed (unless you are outright lying, like Madoff did). All you've got is talent, and all you've got to show for it is a numeric result.
I think of this as a proportional split between time and talent, such as this:
On the extreme left is completely unskilled labor, and on the extreme right is "nothing but skills" labor.
So let's say you were hired to sit on a manhole cover in order to prevent zombies from coming out of it. You are being paid 100% for your time. You are applying no talent at all to this occupation - – the only asset you are bringing is your body's mass (it could be argued that some folks are more talented than others even in this respect, but let's keep it simple).
If you are a sales clerk at a high-end clothing store, you are being paid partly for your time (someone needs to be there to make the place look open for business and to make sure people don't just steal things) but also partly for your talent (your knowledge of clothes; what looks good on a particular person, etc.).
No one is going to pay for a trader's time. You can sit there all year long, working your tail off, and if the talent isn't there, you're not going to get a stipend. In fact, you are going to work very hard for the privilege of losing money.
Of course, the market's behavior has a direct relationship on what kinds of results your talent brings (which I know all too well!), but that is the biggest task of all: honing your skills so that the market's behavior becomes, ultimately, irrelevant to your ability to generate profits.
