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The list of personal qualities required to build a successful trading career (or a successful career in any area of the financial and investing world, for that matter) sometimes appears to be endless. However, one quality is always first on the list: self-discipline. Self-discipline is, in turn, composed of many parts, the cornerstone of which is the ability to set limits.
Setting limits can be viewed in many ways -- as an ability or an innate talent, as a gift, as a willingness or personal decision, an inner discipline, or even as a virtue to be developed through personal commitment. However you define the quality of setting limits, without it, success is either an elusive dream or a temporary condition. Further, many people seem to have areas in their lives in which they can set limits and other areas in which they are incapable of doing so.
Such a dichotomy is often seen as the ability of a person to set limits in his professional life while being unable to set limits in his personal life. A prime example are the fabulously successful stars of the entertainment and professional sports industries who have lost it all or have tragedy fall upon them due to their inability to set limits on their personal indulgences: from Fatty Arbuckle to Elvis Presley, John Belushi, Mama Cass and Janis Joplin, all the way to Mike Tyson.
LIMITS FOR TRADERS
In few commercial endeavors is the need to set limits more urgent than in trading. If a trader cannot or will not set limits in his trading, he will rapidly put himself out of business and lose everything. If he only periodically fails to set limits, he can produce the very same results, except it will take a bit longer.
If, on the other hand, a trader maintains a strict policy of setting limits in his trading and then lets the pent-up steam escape uncontrollably in his personal life, the effects on his trading will eventually begin to appear in subtle and destructive ways.
There is no escape or easy way out from the need to set limits.
HE COULDN'T SAY "NO"
Few people have the opportunity to begin life in the kind of loving and supportive home environment in which Jon, a 28-year-old trader, was raised. His parents, both educated and successful people, were devoted to both Jon and his older brother, Jacob. In addition, Jon's grandparents were equally devoted and doting. Growing up, Jon and Jacob were afforded every conceivable opportunity to learn and experience life in a supportive and caring environment.
As expected, these two young men developed into attractive, educated, self-confident, hard-working human beings. Jacob built a highly successful business and lives in a large, beautiful house surrounded by a loving wife and three children. Last year, Jon made over $500,000 as a committed, disciplined trader! This handsome young bachelor's free time was filled with dates with the most beautiful and desirable young women in his New York suburb.
A not-so-hidden problem: Why, then, was Jon coming for counseling? What was wrong and why did his brother insist that Jon do something about it?
The most obvious sign that something was seriously wrong was the fact that Jon's income for this current year has plummeted to $50,000. With less than a 10th of his previous year's income, Jon does not have enough money on which to live after having developed expensive tastes. The second sign that something was wrong was that Jon has nothing tangible to show for all of the money he has earned. He owns no home or condominium, no flashy cars or boats. His checking account is anemic and he has no savings or investment portfolio. In fact, last year he paid the government 50% of his income because he had done no planning for his financial security.
The third sign of trouble was that Jon had no girlfriend or long-term relationship. In fact, the longest relationship he has had with a woman lasted four weeks. He moves on to the next as fast as he can, calling himself the "Honeymoon King." His self-anointed title refers to his predilection for avoiding commitments and entanglements before they can make any claim on his feelings.
And, finally, the last sign that Jon was in trouble, the one that was the most serious and dramatic, was his long history of using and abusing every type of addictive drug, narcotic and illegal substance known. In addition, he is an equal-opportunity self-abuser who eats whatever junk food he wants and then exercises on a schedule of total abstinence punctuated by periodic killer workouts. By his own admission, Jon is withdrawing heavily from the stored-up health benefits of his youth.
When two people of equal weight get on their respective ends of a seesaw, the balancing point is in the middle. The board rests perfectly balanced on the support that we call the fulcrum. The trick to long-term success in trading is to find that point that balances the seesaw of our lives.
Adrienne Laris Toghraie is founder and head of both Trading on Target and Enriching Life Seminars. She may be reached at Trading on Target, 100 Lavewood Lane, Cary, NC 27511, 919 851-8288, fax 919 851-9979.Excerpted from an article originally published in the December 1997 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved.
© Copyright 1997, Technical Analysis, Inc.