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The Unavoidable Cost of Success in the Stock Market

September 29, 2014

If you want to be the best, you have to do things that other people are unwilling to do

-Michael Phelps, winner of 17 Olympic medals


Ask yourself, what are my goals? Even if you haven’t thought out a life plan, probably a few aspirations come to mind right away. Now ask yourself, what would I give up to achieve those goals? That’s another story, isn’t it?


The choice to sacrifice is difficult, but it is one of the most important decisions you will make in the pursuit of success. Sacrifice means prioritizing, which could result in giving up certain activities to have the time to pursue trading.


Admittedly, this is a tough step to take, but no champion has a completely balanced life when he or she is going for a gold medal. Champions are laser focused on their goal; they understand the power of a narrow focus. This comes at a price; it’s called sacrifice.


To Define Is to Sacrifice


I fear not the man that has practiced 10,000 kicks once, but I fear the man that has practiced one kick 10,000 times. —Bruce Lee


I assume that one of your goals is to become the best stock trader you can be or at least to improve your investment results. To have any chance of real success, you will have to make some choices about how you are going to pursue that goal.


Odds are that you won’t be the best value trader, the best growth trader, the best day trader, and the best long-term investor. If you try to do it all, you will most likely end up a mediocre jack-of-all-trades. You can’t say that a trader is a trader any more than you can say that a doctor is a doctor.


Can a physician be the best brain surgeon, the best heart surgeon, the best psychiatrist, the best pediatrician, the best rheumatologist, and the best bone specialist? Of course not. Consequently, you will enjoy market cycles when your trading style outperforms other styles, and you will also learn to accept periods less conducive to your style.


I doubt you will overcome these less favorable phases by adopting a different style each time you run into difficulty. When it comes to stock trading, I know no one who, for example, can successfully trade value in one cycle and then switch to growth the next or be a long-term investor one day and then a day trader to suit the market du jour.


To become great at anything, you must be focused and must specialize.


Trader or Investor?


The average trader spends the majority of his or her time vacillating between two emotions: indecisiveness and regret. This stems from not clearly defining one’s style. The only way to combat paralyzing emotions is to have a set of rules that you operate from with clearly stated goals.


You simply must make a decision: Are you a trader or an investor? Some people have a personality best suited for trading, and some prefer a longer-term investment approach. You will have to decide for yourself which is best for you. Keep in mind that if you fail to define your trading, you will almost certainly experience inner conflict at key decision-making moments.




• Should I buy?

• Should I sell?

• Should I hold?




• I should have bought.

• I should have sold.

• I should have held.


If you are a short-term trader, recognize that selling a stock for a quick profit only to watch it go on to double in price is of no real concern to you. You operate in a particular zone of a stock’s price continuum, and someone else may operate in a totally different area of the curve. However, if you’re a longer-term investor, there will be many times when you make a decent short-term gain only to give it all back in the pursuit of a larger move.

The key is to focus on a particular style, which means sacrificing other styles. Once you define your style and objectives, it becomes much easier to stick to a plan and attain success. In time, you will be rewarded for your sacrifice with your own specialty.


Excerpt from Trade Like A Stock Market Wizard; How to Achieve Superperformance in Stocks (McGraw Hill 2012)

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