The race against yourself

A guy on the radio talks about the race against yourself. It is a totally different context than trading, but it is a worthy topic. Another similar title that I've been thinking about is the "fear of missing out."

In trading, there is almost always someone who has a higher rate of return over any given period. With every monthly summary, I can point to trades not taken, or gotten out of too early, or slightly better timing that would have yielded huge gains. That is the nature of options when a doubling or tripling in a week, can be common.

Risk and reward often go hand in hand. The fear of missing out, is another phrase to describe greed. When a stock or ETF rockets higher, or lower for that matter, a lot of folks will want in, due to greed. When to chase the rocket, and when not to, tends to be clear in hindsight. In real time, those kinds of decisions might be determined by trading style or trading system, and/or by years of market experience.

Some traders do well following trend, others do better trading counter-trend. That's part of the race against yourself, that inner game of knowing yourself and knowing what kind of style, what kind of system might work best for you. Personality, risk tolerance, pain tolerance, available capital, are all factors into trading style. A good or poor memory, attention to detail, ability to pull the trigger, quick thinking vs. slow analytics and seeing the bigger picture are some more factors.

Especially for novice traders, a trading journal can be an extremely valuable tool. That's one reason I do this blog, it is a public trading journal with a record of my short term trades. If a novice trader writes about every trade, and then takes time to look back, they will start to see what kind of trades work for them. Over time a trader will develop a style that fits them, that works for them.

Some folks, aye, most folks would do better taking the other pill, and go with low cost indexing, the Vanguard way, and forget about trading. Just as options are not for everyone, position trading is not for everyone either. Day trading is for an even more select group, especially as the skill required and capital required grow ever greater as computerized "Watsons" dominate the day trade with an average holding time of 13 seconds and profits that might average 1/8 of a cent per share.

Long time readers know that I like to use baseball analogies, that I see my trading style like that of a singles hitter, striving for a high batting average, with few home runs. Bunt singles are a fine thing for me, but beyond boring for big home run hitters. For the race against yourself, golf might be the best sports analogy. While a person might compete against others, a golfer has to focus on that inner game, and keep a calm and clear mind to succeed at golf.