The Trader’s Journey

The trader who becomes successful does so by finding his own way. The most important knowledge for a trader is knowledge of self. There are many good trading systems, but if a thousand traders succeed by using one system, they will do it in a thousand different ways. Until I understood this, I was bound to fail.

I chose to acquire self-knowledge in the classical manner: reading, writing and rhetoric. Over the years I have read widely. I continue to find new authors and new ideas, but I am especially indebted to:

Robert Prechter, for describing the personality of waves in the market and for explaining the influence of the unconscious herding instinct in markets and, indeed, in all of the endeavors of free people.

Richard Russell, for teaching me not to put my trust in forecasts.

Alexander Elder, for showing me that the emotions that make the market tradable are pain and regret.

Pete Steidlmayer, for frankly revealing that, even after twenty years of success as a trader, he spends eighty-five percent of his time working on his mindset and only fifteen percent analyzing the markets.

Nassim Taleb, for making me understand that, above all, my trading system must accommodate the reality that I don’t know what I don’t know, and that the point of money management is to be able to trade tomorrow, no matter what happens today.

Mark Douglas, for reading my mail and for giving me a picture of how I want to be when I grow up.

I also want to thank Dick Diamond for his generosity and friendship and for sharing his approach to trading with me.

Finally, I wish to thank Sid McNeil for greatly enriching my life in the course of a thousand wonderful conversations over a decade or so. He patiently told me, in every one of those conversations, that I had to do it myself. I think I got it, Sid.

Why Write?

I’m publishing peer review papers on this page. My readership includes a number of traders, and I expect them to critique my work. Their comments will serve as a grade. In this manner, I won’t be thinking in a vacuum. But I can hear them right now, saying, “Are you crazy, Rod? You’re gonna tell everybody what you’re
doing?”

Traders are a circumspect lot. Conventional wisdom among traders is that when you find your winning edge—the strategy that makes money for you—you want to keep it to yourself because if too many people are using it, it will lose its effectiveness.

I don’t believe this. First, I’ve never had anyone tell me that and give me proof. Second, it is totally counter to what I now understand about trading—everyone who succeeds does so in a unique fashion. Additionally, there is evidence to support the idea that you don’t have to hide your trading plan for it to work for you.

Some years ago, Richard Dennis taught a group of young men his trading method. They were called the Turtle Traders. Some made the grade and did well. Some didn’t. One of the ones that failed later began marketing the “Turtle Traders System” for money. The successful Turtles felt this was wrong, so they put the system on the internet free. They knew that no matter who had it, it would not keep them from being successful, each in their individual way.

Welles Wilder published a book of his methods back in the 70s. His systems are very popular. I’m told he still uses them himself. I understand that the popularity of his systems has not interfered with his success one whit.

 What about Rhetoric?

Ah, yes, rhetoric: the defense of my thesis in the crucible of the market. That’s trading. The behavior of my equity curve over time is the final grade.

Cheers,

Rod

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