One of the most epic challenges known to man, was when Cool Hand Luke pulled off the unconquerable 50 hard-boiled eggs in one hour
It was something considered impossible to man... but not Cool Hand Luke.
But like the first post in this series, Cool Hand Luke would have made for one horrible trader.
So in this final post of this two-part series, how does this incredible achievement in the folk-lor of egg-eating relate to trading?
A lot of people trade like they would if they were trying to achieve Cool-Hand Luke grandeur.
I got an email the other day, from a website encouraging me to sign up for their trading workshop. In that email, the person bragged about having made 100,000 trades in his life time. Now the guy can be two hundred years old and that would still be an admirable feat, but I don't even think he's over 40 years of age. Assuming he would have traded every trading day for the past 15 years, that would be the equivalent of 26 trades a day! Do I believe he did this? Not at all.
But what he's bragging about is making that many trades in a day. Now unless your are some infamous trading algo or HFT firm, I highly doubt that 26+ trades per day is all that healthy to be doing.
First of all, I don't even think human capacity allows for a person to be at peak performance when trading that many positions. Not only that but you are going to run up a score in commissions. Essentially if he had been trading at $7.00 a trade over 15 years (given 15 years ago the commissions were more like $30-40 per trade), just to get in and out of the trade would have cost $1.4 million alone.
That's a ton of expenses to overcome during the course of even just 15 years in trading, and I doubt many have done that starting from humble means.
The Rule of Thumb
For me personally, I trade much lighter. In fact I have a rule of thumb that says, if I can't recite all my positions off of the top of my head, I probably have too many. Because at that point, I'm probably not staying on top of all my open positions and instead leaving myself exposed to unnecessary risk.
Trading is so different than reality, and that's the point that I want to always drill home to traders in that, what is admired in the real world will crush you in the realm of trading. Thinking you have to trade everything that ticks, just because it might have a decent trade setup is bad business. Leaving it all on the table will simply be taken off the table by another trader.
Please realize that trading is a game of inches and that you become successful at it slowly and steadily. It's a fools game to believe that it is achieved by leaps and bounds. Because it doesn't.
It would be much easier if I through fantasy numbers around on SharePlanner that says "Sign up today and become a millionaire in three months". I'd draw a much larger audience if I did. But I couldn't sleep at night knowin that is on my conscience. Instead I try to bring the realities, and how you can in fact achieve 'Sustainable Success".
Understanding your Capacities
Stuffing yourself with too many positions will cost you big-time in the end, and services pushing that on you are insane and should be avoided.
Plot your strategy, know the number of positions you can successfully manage and be successful at. Don't trade everything in sight, and stay off of Twitter if you are prone to do so. There are far too many people out there trying to suck you into their own losing trades.
Misery loves company and theirs plenty of it on Wall Street, and they'll be sure to take your money at the door.