Mastery and Leverage

Leverage

THE QUESTION

Let me start this out by asking a question. This is a question that took me a long time to be able to answer truthfully. This question forced me over time to change the way I viewed what I did on a daily basis as a trader or otherwise. This question forced a change not of my conscious action, but a change of those actions perpetuated by my subconscious.

The Question: Do I really want to master your craft?  And do I really have the confidence to put my full weight and force behind that decision? Or do I want to do what I’ve always done which is set no goals, create no strategy, and think things should be easy and when they aren’t, throw up a bet and a prayer and hope things work out good in the end?

If I asked you that question what would your answer be? Its an easy question for any trader to answer actually. All you would have to do is look at your trade sizes in comparison to your account, or simply, your use of leverage.

See I believe that the true answer to whether I want to be a master of my craft or a quick profit gambler is how I use leverage. But lets not skip to the end of the story right away. Lets start off with how does an amateur approach the market? And how does he or she use leverage?

This was the central theme of my problems before I began to consistently make money and even to this day the only time I have painful trades or regrets is when I don’t guard my leverage. It is becoming my golden rule.  Now, maybe to some of you this seems ludicrous but I’m telling you, the question of mastery was THE question I had to answer to get trading, and for that matter any other pursuit I have undertaken, to work for me. Maybe some day when we are sharing a cup of coffee and discussing our trading lives I will tell you all about the stupid things I’ve done and the times I have failed not for lack of ability or opportunity, but simply because it was hard and I didn’t know how to set goals…

It was always the same story for me. No matter how many times I BS’d my way through answering THE question by saying “ya I really want to learn mastery of trading or I want to be the best on my college football team or I want to be patient and perfect my craft and make something out of this…” I would just as quickly lose sight of that and revert to the old film and be the same guy. I would develop no plan, I would contemplate no strategy, and then I would wonder why the hell I didn’t accomplish any of the things I set out to do. And then bam, some other pursuit or cause would catch my eye and I would start over…

George Leonard is the author of “Mastery, the keys to success and long-term fulfillment”. It was recommended to me long ago by my friend Rob Booker and is probably one of the most formative books of my adult life. I re-read it ever chance I get. It describes “the dabbler” and it makes me want to throw up when I read my old ways written on the pages:

“He (the dabbler) can’t wait for the next lesson. The falloff from his first peak comes as a shock. The plateau that follows is unacceptable if not incomprehensible. His enthusiasm quickly wanes. He starts missing lessons. His mind fills up with rationalizations. this really isn’t the right sport for him. Its too competitive, noncompetitive, aggressive, non-aggressive, boring, dangerous, whatever.”

“The same thing applies to a career. The dabbler loves new jobs, new offices, new colleagues. He sees opportunities at every turn. He salivates over projected earnings. he delights in signs of progress, each of which he reports to his family and friends. Uh oh, there’s the plateau again. Maybe this job isn’t right for him after all…”

“The dabbler might think of himself as an adventurer, a connoisseur of novelty, but he’s probably closer to being what Carl Jung calls the puer aeternus, the eternal kid.”

Ya. wow. Get the book if you haven’t read it. It may just change the entire way you view trading… (You can read it on Scribd HERE)

How do I know I did this? The most obviously glaring disgusting example was my risk through leveage. I didn’t want to put in the time and effort to actually learn how to trade properly and to my partial defense, I didn’t know any better. It’s not like there are many people out there like me shouting from the roof tops “Take is slow! Use the plateau to learn and practice and train! Become a master of your craft over time!” No, it’s quick systems for quick profits and our attention spans waver as the money doesn’t only not appear, it disappears. So we move on to hopefully find some unknown variable out there to replace the grueling practice and battles in the trenches where real traders are born. So I gambled. I over leveraged. I gave myself no chance to learn and succeed.

I fed the resistance exactly what it was hungry for through my amateur behavior. 

MY ANSWER

So how did I fight this? How do I still every day fight this every day? There are many ways but I am choosing to focus this piece on the use of leverage. It was a prominent player in my journey as a trader and is almost always the determining factor of whether I am practicing on the plateau or trying to get rich quick. It reveals my motives immediately and the more I am aware of it, the easier it becomes to recognize and defeat.

I can recall many times hearing blurbs on videos or some line in a tweet  saying “The worst thing a trader can do is over leverage” or “The easiest way to lose an account is to over leverage”. So why don’t we listen? Why didn’t I listen. Because honestly, at that point, I said all the right things, but deep down, in the controlling part of my brain, I didn’t want to actually make the decision and put my full agency behind becoming a master, I wanted to take the easy way out, and look good doing it.

So, simply, keep it small. What if I told you that on every 10k in an account I only allow myself to run UP TO a .1 lot? What if I told you that the most successful traders I have ever met run .2, .3, .5 consistently on $1 million dollar accounts? If you are like I used to be and that makes your stomach turn and your head spin because you have no idea how to make “actual money” trading such small size, then you haven’t reached the place where practice and the plateau are the goal. So I run .1 lots on most of my trades, but I make thousands of pips a month because I allow my head the freedom to manage my way through losing trades, not just shut it off because what will happen if it drops another 10 pips!!??

Keep it small, learn the mastery of making pips, not making money. 

HOW TO MAKE THE DECISION?

We can’t make the amateur decision to be a trader because we want to run FROM something. We can’t out run a bad job or go from poor to rich just by becoming a trader usually. Just like skipping from one bad relationship to another usually doesn’t turn out well, trading is the same. We have to believe in the decision and be willing to put our full agency behind it.

Here is a TED talk I found a little while ago that deals with making decisions. I really enjoyed it and think that you will find some helpful hints about how to stop trying to choose from on the outside and start to choose from the inside. Making choices not because I am saying no to something, but because I really want to say yes to something and put my full weight, effort, and energy into making that “yes” a reality.

So maybe today we can decide that we want to actually put our full force behind becoming a trading master, get on the plateau, learn your craft, let go of the need to prove your trading ability and bravado, lower your leverage, set some attainable goals, and just be ok with what we can do today. Because I guarantee you, the longer you are willing to sit on the plateau, the better your trading future will be.

Thanks for reading today. Always feel free to reach out to me in any of these ways:

Twitter: @fx_inventory

shonn@shonncampbell.com

or leave a comment in for me. I always respond.

TradingLife:Mastery

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2 thoughts on “Mastery and Leverage

  1. I enjoyed this one Shonn very much. I liked that sentence, ” to replace the grueling practice and battles in the trenches where real traders are born.”
    Cheers for your positive comments a few weeks back.

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