Trader discipline

Andre

I read 'Market Wizards' -- Interviews with Top Traders by Jack D. Schwager.  Jack interviews about 16 of the top traders, including one with Gary Bielfeldt.   From what I've learned, Gary Bielfeldt became a major player in the futures market as a T-bond trader in the 1980s and was known as the best individual trader in that market.   By the early 1980s, his trading size had increased to the level where government-established speculative position limits were becoming a problem, so Bielfeldt shifted his focus to the T-bonds market.   He eventually traded at the institutional level but started with a $1000.00 investment in the soybean market, while trading from his home.  There was no internet in the 1980s, so the trades were placed over the phone.

Here's my summary and interpretation of Gary's trading experience and wisdom:   When Gary was asked why most traders lose, he said "they overtrade, which means that they have to be right a lot just to cover commissions."   He said that the most important thing is discipline.  Second, you must have patience.   If you have a good trade working for you, you have to be able to stay with it.   Third, you'll need the courage to go into the market.  This courage comes from and starts with being adequately capitalized.   Fourth, you must have a willingness to lose; that is also related to adequate capitalization.   Fifth, you need a strong desire to win.   He went on to say that most traders have a tendency to take risks that are too large at the beginning of their careers.  Gary Bielfeldt quotes:  "You should have the attitude that if a trade loses, you can handle it without any problem and come back to do the next trade."   "You can’t let a losing trade get to you emotionally."   "You must have a method for staying with your winners and getting rid of your losers.”

As Gary continued to elaborate, many of us start out in our trading careers thinking that we are the best and that we are going to beat the market.   It's certainly fine to have confidence but it's not advisable to start with a mindset thinking that you know everything.  Humility will serve you better as a trader.   As Bielfeldt has stated in numerous interviews, many beginning traders are greedy and bold and end up wiping out their capital.  That is why Gary said that he will never get tired of saying that novice traders should treat this endeavor as a serious business and put in the time to study.   When they start trading, it should be with very small positions.

'Analogy between trading and poker' -- Gary learned how to play poker at a very young age.  His father taught him the concept of playing the percentage hands.  You don't just play every hand and stay through every card, because if you do, you will have a much higher probability of losing.   You should play the good hands, and drop out of the poor hands, forfeiting the ante.   If you apply the same principles of poker strategy to trading, it increases your odds of winning significantly.  Gary has always tried to keep the concept of patience in mind by waiting for the right trade, just like you wait for the percentage hand in poker.   If a trade doesn't look right, you get out and take a small loss.