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10,000 hours, 10 years, 10,000 trades
By Singapore Man of Leisure  •  June 26, 2013
10,000 hours A common theme that appears in Malcolm Gladwell's book - Outliers: The Story of Success - is this "10,000-Hour Rule".  We know it kind of intuitively don't we? Hardcore gaming friends that that play Starcraft and CounterStrike day and night will beat the pants off us casual gamers. The same it goes with billiards (here's looking at you coconut) or mahjong (and all you tai-tais out there). Curiously, when it comes to investing or trading, retail investors and traders seem to suffer from the Lake Wobegon effect - we overestimate our abilities and underestimate the time and effort needed to learn our craft. 10 years For a part-time retail investor, 10 years would be about right.  Within this time frame, if we are lucky, we would have experienced 1 or 2 bull/bear cycles. A lot of ideas, plans, strategies, tactics - learned from books, seminars, courses, etc - did we implement them? Did we jump in with glee during the lows of 2003 and 2009? What happened to buy when there's blood on the street? Not so easy when some of the blood is ours! No? Some say they are waiting to scoop bargains if STI goes to 2700 during this current phase of correction.  Eh... If 2700 is "good value", did the same "investors" take some money off the table when STI was above 3400 last month during May 2013? How about anytime during year 2007? The mistakes and lessons I've learned from the crash of year 2000 to 2003 and the subsequent bull market from 2003 to 2007 were very enlightening. Most of it was an understanding of myself - my own temperament, my TRUE pain threshold, and my own emotions. Whether I am more comfortable with "go with the trend" or am I suitable for contrarian plays. Whether I am more a value (buy low; sell high), or whether I am more a growth (buy high; sell higher) investor.  Some buy at 52 week lows; some buy at 52 week highs. Where I prefer to buy that's more important!!! I've experienced euphoria and I've experienced capitulation. Now these emotions come in handy when I monitor market sentiments! I guess I am now more discerning what I read and learn. I focus on what fits me. Must filter! Less on which guru said this or that. I make a real effort to listen to my own inner voice.   But I guess that's normal. Like a singer, most of us start by emulating others; with the passage of time, we realise we need to develop our own voice if we want to be successful.  10,000 trades For retail traders, I think we are luckier in a morbid sense. We get to learn about ourselves a lot quicker! Most will get washed-out within 6 months. We quickly realise we don't have the temperament or mental strength to handle making multiple trades in succession. Some have problem squeezing the trigger. Some cannot take the emotional upheavals, some just have unrealistic expectations on themselves or on the markets. It's not that trading is "harder" than investing. It's just a simple phenomenon that in 6 months, we probably make more trades than an investor in 2 to 3 years!? But once we survived our first 2 years, I guess we're on your way towards our first 10,000 trades and the resulting epiphany - on who we are as a trader, and our position in the market. I've not reached my first 10,000 trades yet; but I am so looking forward towards it. I just hope my futures account will be a significant stake then to profit from my then epiphany! Meanwhile, I just plod along on my tiny futures account (what I can afford to lose) and focus on discovering more about myself and the markets along the way. And another "advantage" for trading is that we can try out different strategies and setups with quicker market feedback. For an investor, the feedback could be 5 or 10 years later when they belatedly discover a flavour of the decade investing style may not work... Ouch!
Singapore Man of Leisure (welcome to my blog; just google it!)
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By Singapore Man of Leisure
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5 Comments

5 responses to “10,000 hours, 10 years, 10,000 trades”

  1. Derek Lim says:

    Hi SMOL,

    10,000 trades/ 10 years may not make us a better investor but 10,000 bulls/bears cycle definitely will. Problem is we can’t live that long. LoL.

    Cheers!

  2. Tommy Wong says:

    I am not in total agreement with the “10,000-Hour Rule” in Malcolm Gladwell’s book “Outliers: The Story of Success”. One glaring example is the human society. How many hours or years have humans tried to manage the society, and is it a “success”?

    Quoting from the Introduction of my book “Wisdom on How to Live Life”, I am more of the opinion “Humans being the most intelligent species and having lived on Earth for thousands of years, we are yet nowhere near to a life of peace, love, joy and harmony.” I believe that to be “successful”, it is not sufficient to just spend time; it also requires “wisdom”.

  3. Jared Seah says:

    Dr Wong,

    That’s the beauty of diversity in thoughts and ideas ;)

    The “10,000-Hour Rule” I guess it’s meant too be an inspiration for “genetically less well-endowed” individuals like me.

    I remember my secondary school geography teacher motivating me with:

    “Jared, don’t give up! Smart students just need 10 minutes of reading to understand. If you need 7 hours reading to understand, so be it. But once you understand, you understand.”

    Geniuses and natural talents will probably disagree as they need only 1000 hours to master a skill ;)

    Ah! Wisdom!

    May I ask a question?

    Does this “wisdom” you speak of comes automatically like in biological inheritance? Or does it require “effort” from us to cultivate – be it gradual or sudden enlightenment?

    • Tommy Wong says:

      Hi Jared

      Thank you for your reply.

      Regarding your question on “wisdom”, I found that I gained my own wisdom mainly through experience, and be very discerning in what we are told and what we read. For the discernment part, yes it requires effort so that we see what is happening rather than what we are told is happening. Since wisdom comes from experience with discernment, it can come gradually or as a sudden realization. This is also why in spirituality, there is no “bad” experience because a “bad” experience can be a “very enlightening” experience. You may contact me through my website for further discussion.

      Best wishes!

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