That That which does not kill us

“That which does not kill us makes us stronger” – Friedrich Nietzsche.

It’s a cheesy quote to start with, I know. Bear with me here.  

It turns out it might be true when it comes to professional success as well.

In a recent paper published in the journal Nature, researchers found out that early-career setbacks can result in a stronger career in the long term – stronger even than people who never had a setback.

To sum up the paper in just a few lines, the experiment compared two groups of scientists: a group that scraped over the line in getting a grant from the US government and compared that to a group that had just missed out on a grant (one that just made it, one that just missed out).

Ten years later, the group that had not received the grant went onto have more successful careers than the team that had won the government grant.

So those who’d experienced some pain early on in their careers went onto come back stronger than those who didn’t fail.

I couldn’t help but think of how that pain would’ve fuelled their success in later years and how that so encapsulates what I’ve seen in over ten years of trading and watching hundreds of thousands of traders.

Why early successes in trading could hurt you

You may have seen my thoughts on Overconfidence bias before and it got me thinking how much this could spill over into early successes trading.

I’ve seen this far too many times in traders before.

It’s like the story of the tortoise and the hare. It’s the slow and steady trader that wins the race.

The traders I’ve seen who are new to trading will open their accounts, ignore basic risk management and trade gigantic positions on their account and make huge profits on their first few trades. While I love to see it, often they lull themselves into unbelievable amounts of overconfidence and a feeling of invincibility.

They’re the stories you read like “one man makes $1,000,000 trading options on first trade” or “this is how much you would’ve made investing $1 in Google shares since 2004” or “my friend just made $15k betting on AUDUSD” or other financial “junk food” as it should be labelled.  

Because it is too easy in their eyes, they’re always chasing the same early successes they had. 

What I took away from the Nature paper is that the easier we think something is, the more we can fool ourselves into believing something which isn’t true.

Taking the pain

Let me be clear. I’m absolutely not saying that you must lose big to win big. Nor am I saying making money early is bad.  

I’m saying that in my experience, my firm belief (now backed up by some solid research in a different field) is those that suffer early setbacks in their trading are like those who just missed out in their professional lives. In the same vein, if it’s too easy at the start, you can hurt yourself and trick yourself into thinking you’re better than you are.

It’s more like you need to hit some minor lows to hit the highs, but don’t ruin yourself. Call it a bloody nose.

Trading is not some easy game that can be won in the first week or month. Just like you wouldn’t expect to be a pilot after one week of flight training (though you can certainly have the goal!), the same is true for trading.

It’s hard. Very hard. There’s so much to take in and digest. The market is constantly evolving. That’s why you’ll hear statistics like 40% of traders don’t make it. Most people expect too much and give up too soon.

But real success in trading is more like a way of life.

It involves hard work, true grit, hours upon hours of learning and the ability to look and feel wrong many, many times (and often in painful ways both mentally, financially etc).

If you are just starting and you’re shooting the light outs, then maybe that’s not such a good thing. And if you’re struggling, know that you’re not alone.

Far better for you to see it as the challenge that it is. That a little pain is part of the journey and that if it were so easy, everyone would be doing it.