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You Can't Become Rich In Your Pocket Until You Become Rich In Your Mind | ||||
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In both music and trading, you do best when youre relaxed, and in both you have to go with the flow==== Why do you believe you have excelled as a trader? ==== I believe my most important skill is an ability to perceive patterns in the market. I think this aptitude for pattern recognition is probably related to my heavy involvement with music. Between the ages of five and twenty-one, I practiced piano for several hours every single day. In college, I had a dual major of economics and musical composition. Musical scores are just symbols and patterns. Sitting there for hours every day, analyzing scores, probably helped that part of my brain related to pattern recognition. Also, practicing an instrument for several hours every day helps develop discipline and concentration-two skills that are very useful as a trader. ==== Could you elaborate some more on the parallels between music and the markets? ==== A musical piece has a definite structure: there are repeating patterns with variations. Analogously, the markets have patterns, which repeat with variations. Musical pieces have quiet interludes, theme development, and a gradual crescendo to a climax. The market counterparts are price consolidations, major trends, and runaway price moves to major tops or bottoms. You must have patience as a musical piece unfolds and patience until a trade sets up. You can practice, practice, practice, but youre never going to play a musical piece perfectly, just as you're never going to buy the low and sell the high on a trade. All you can hope to do is to play a piece (or trade) better than before. In both music and trading, you do best when youre relaxed, and in both you have to go with the flow. A fmal analogy may explain the type of trading Ive gravitated toward. You must be able to read individual notes and learn a piece of music measure by measure before you can play the whole piece through. Perhaps thats why I spend most of my energy on short-term trades rather than analyzing the long-term picture. ==== There are so few full-time women traders. Do you believe there are any obstacles to women trying to get into the field? ==== I have sometimes felt that I had to work twice as hard to gain respect or to be taken seriously. But, quite honestly, that perception was probably based on my own beliefs rather than grounded in reality. In retrospect, I dont think that being a woman has ever really hindered me. In fact, if anything, it sometimes seemed that people made an extra effort to be helpful to me, perhaps because there are so few women traders. Of course, there may be pockets in the industry in which women do encounter barriers-for example, the large New York institutional firms and banks. I have known women who felt that sexism interfered with their ability to land a job on a trading desk. But, again, I have never personally encountered such difficulties. I would strongly encourage women who have the confidence to become traders to make the effort. There is no reason for women to feel any fears of intimidation. Trading, more than any other field, is a bottom-line business. People look at your performance numbers. They dont care if youre a man or a woman. If you perform well, youll get financial backing. Conversely, if youre incompetent as a trader, just being a man is certainly not going to help. Women may also have intrinsic advantages over men as traders. For example, women are less likely to use trading as an ego trip. They arent prone to making the macho-type trades [putting on a large posi tion with the intent of feeling a sense of power in moving the market], which I have seen lead to the financial ruin of a number of male traders. Even the largest women traders I know tend to be very low-key, almost reserved, as traders. ==== Are there any other differences between women and men as traders? ==== Women may be more intuitive. I certainly feel that I can see patterns that other people cant, but I dont know if thats because Im a female. 1 think its often more acceptable for a woman to rely on intuition than it is for a man to do so, and intuition certainly comes into play in trading. For example, when Im watching the price quotes, I never say something like, Oh, the market is down exactly 62 percent, I have to buy right here. Rather, I might think, Gee, it looks like weve corrected enough and the price has stopped going down, so Id better buy. ==== In our initial phone conversation, you mentioned that youve shared your trading methods with other traders. Arent you concerned that revealing your approach could destroy its effectiveness as other people start to use it? ==== I truly feel that I could give away all my secrets and it wouldnt make any difference. Most people cant control their emotions or follow a system. Also, most traders wouldnt follow my system, even if I gave them step-by-step instructions, because my approach wouldnt feel right to them. They wouldnt have the same confidence or comfort in the trading method as I do. But for arguments sake, lets say that showing my methods to other traders did eventually cause some of the patterns that I follow to change. If these patterns changed, new ones would be created, and Im confident that I would find them. ==== What advice would you give novice traders? ==== Understand that learning the markets can take years. Immerse yourself in the world of trading and give up everything else. Get as close to other successful traders as you can. Consider working for one for free. Start by finding a niche and specializing. Pick one market or pattern and leam it inside out before expanding your focus. My favorite exercise for novice traders is pick one market only. Without looking at an intraday chart, jot down the price every five minutes from the opening to the close. Do this for an entire week. Be in tune to the patterns. Where are the support and resistance levels? How does price act when it hits these levels? What happens during the last half-hour? How long does each intraday price move last? You wont believe how much you can leam from this exercise. Never fear the markets. Never fear making a mistake. If you do make a mistake, dont complicate the position by trying to hedge it- just get out. Stay actively involved with the market. Dont just sit passively in front of a monitor, or simply stare at charts. Notice how many old-timers who have been successful for years still construct their own point-andfigure charts by hand intraday. They keep the same routine day after day. Develop your own routine for taking periodic market readings. Never be greedy. Its OK to leave money on the table. If you cant get in at a favorable price, let the trade go and start looking for the next trade. Finally, remember that a trader is someone who does his own work, has his own game plan, and makes his own decisions. Only by acting and thinking independently can a trader hope to know when a trade isnt working out. If you ever find yourself tempted to seek out someone elses opinion on a trade, mats usually a sure sign that you should get out of your position. ==== What are your goals? ==== Theres no better satisfaction than playing a piece well, whether the instrument is a piano or the markets. I measure my progress not in dollars but in my skill in predicting market patterns-that is, in how close I can come to pinpointing my entries and exits to the market turns. I believe that I can go into any market with just a quote machine and out-trade 98 percent of the other traders. Over the next ten years, I would like to significantly step up my trading size. I really believe that I can become one of the best traders around. Certainly one of the primary common characteristics I have found among the great traders is an almost compelling sense of confidence in their ability to succeed. Linda Raschke personifies this type of confidence as well as any trader I have interviewed. There is not the slightest doubt in my mind that she could start over in any market with minimal funds and excel. She truly believes that she will become one of the best traders ever, and I for one certainly wouldnt take the other side of that bet. Are traders like Raschke confident because they succeed, or do they succeed because they are confident? Probably a little bit of both. However, the key point is that exuberant confidence appears to be one of the essential elements in exceptional achievement as a trader, and I assume in many other endeavors as well. Occasionally, an interview provokes me to reassess my view of reality. I have long assumed that markets might be predictable over the long term but that short-term price movements are largely random. Raschke holds exactly the opposite point of view. She believes that in the markets, much as in weather forecasting, short-term predictions can be quite accurate but long-term forecasting is a virtual impossibility. With her ability to see patterns that others dont, she has been able to trade short-term price swings with a consistency that would defy die laws of probability, if indeed there were no patterns in these movements. Raschke has made me a believer. Clearly, there are predictable movements in price even over periods as short as a few days or a single day. Raschke reminds us that traders are people who do their own work, make their own decisions. One particularly insightful observation made by Raschke is that the temptation to seek out other peoples opinions on a trade is a sure sign that the trade should be liquidated. Among the characteristics that Linda Bradford Raschke cites as essential to being a good trader are a passion for trading, self-reliance in developing trading ideas and making trading decisions, the willingness to take risk, the ability to correct mistakes immediately (because they are inevitable), and patience, patience, patience. |
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