In the film City Slickers, Jack Palance’s character is talking to a young Billy Crystal as they ride horseback along a trail at the dude ranch. When Crystal describes how his life in the city has become stressful, Palance stops his horse, fixes Crystal in his gaze and poses a very Zen-like question.
“Do you know what the secret of life is?” he asks. Crystal says “No, what?”
Palance holds up his black-gloved index finger. Crystal jokes, “Your finger?”
Palance isn’t amused. He simply says, “One thing.” When Crystal asks what the one thing is, Palance responds, “That’s what you gotta figure out.”
This cryptic comment has relevance for traders.
Most traders gradually complexify their trading. It’s easy to do since we are inundated with information: fundamental, technical and situational, along with the opinions of countless commentators and gurus. Paying attention to all this takes us in the wrong direction, toward confusion.
Palance holds up just one finger.
Trading profitably requires an ‘edge,’ which is One Thing that (usually) gives a trader a statistical advantage over a coin flip, otherwise it will be difficult for you to build trust in it. But whatever the win rate, it must also be something that gives you consistency. It is your North Star and it should work to orient you in any market condition: fast up, fast down, slow up, slow down, and sideways.
The One Thing for you as a trader is something you need to figure out personally, because there are as many edges as there are traders. Like contemplating an inkblot, we each see the market differently, and what we see depends on our own biases, agendas, methods and temperament, as well as our recent experience (personal context). The number of combinations of these variables is, for all practical purposes, infinite.
I can’t tell you what the One Thing is; you have to find it for yourself. But there’s nothing more important for your long-term success than solving this riddle.
www.daytradingpsychology.com (for private traders)
www.trader-analytics.com (for banks and hedge funds)
