11th June 06 - The Tipping Point of Trading

Months ago, I speed read through this book named "The Tipping Point: How Little Things Can Make a Big Difference" by Malcolm Gladwell. The focus of the book is on social 'epidemics' - any epidemic by definition must have reached a 'tipping point', a moment where the trend transits from being small-scale and contained to become a major explosive force.

An example of tipping point is the resurgence of the popularity of Hush Puppies, which had long been out of fashion, and were only sold in small shoe stores. Suddenly, a group of teenage boys in East Village, New York, found the cool to wear. Word-of-mouth advertising that these trend-setters were wearing the once-popular suede shoes set off an epidemic of fashion change, and boys all over America had to have the "cool" shoes. (taken from Amazon.com review of the book)

Being a trading coach, I am exposed to hundreds of aspiring traders who wants to make big bucks from trading. I know you are one too, isn't it? After months of observation, interestingly, some of the traders whom I know after much perserverance have reached Tipping Point and has switched from CONSISTENTLY UNPROFITABLE to now, CONSISTENTLY PROFITABLE month after month ... ...

To rise from tininess to greatness in trading, I believe there's 3 important ingredients, namely TIME, ATTITUDE and FOCUS.

In trading, we need time to develop and fine-tune our trading style. Everyone trades with a different style due to differing perceptions of fear and greed. The system advocated by the trading course you've just attended might not be suitable for you if it doesn't suit your risk appetite. I have known of traders who disregard that fact and in the quest of earning back their course fee lost all of their trading capital. Talking about time, we also need time to make mistakes so that we can learn from them and better ourselves. In trading, mistakes cost money and regardless of our account size, we can't afford to repeat the mistakes.

Attitude refers to our mindset in this game. Honestly speaking, how many of you have a "trade to win" mindset before entering any trade or is it more of "Let's hope the market goes my way"? Research has shown that 90% of traders who lose $$ succumb to the latter. To consistently profit from trading, we must have a winning mindset. A winner behaves like a sniper. He/she spends most of his/her time planning for the trade, the contingencies and weighing the risk-reward ratio. After deciding on the plan, the wait for the entry trigger begins. When the market trades to the entry level, no time is wasted. No hesistation on whether to enter or not as the game plan has been thought out and even rehearsed a few times before this moment. The trigger is pulled. BLAM ! One shot one kill! Believe me, this is one of the traits all the great traders have in common.

You can have the best technique and mindset but if you don't know exactly what you want to achieve out of trading, you will not go far in this game. Therein lies the importance of FOCUS. To start off, you must have a goal or outcome to focus on. For example, my goal is to make US$10 million from futures trading by end of 2008 and US$10 million per annum thereafter. Well, some of you may think this is a ridiculous amount but to my knowledge, some traders has done that before, meaning I can do it too :) With a quantum goal in place, next is to come out with the ways to achieve it. For example, I might want to make the US$10 million by making 10% off a US$100 million fund. Next step would to plan how to gather the fund within these 2
years ... As such, you can continue to break down the goal into smaller milestones and that immediate milestone to achieve 10% profit for June 2006 and say 12% for July 2006 and so on and so forth. With this, the mind has something to focus on and the you can look forward to every trading day as it would bring you closer to your dream.

Dear friends, I hope you like what I have shared. If you have any feedback, pls do drop me a comment if possible :)