A little while ago I was speaking with a man who owns a personal training company. He is successful and the business is expanding. As I was speaking with him I realized it is possible to draw a lot of parallels between healthy training and trading the financial markets.
It takes discipline for a lot of people to maintain a healthy weight, but the secret is really simple. It’s calories in vs calories out. If you take in more calories than you expend you gain weight. If you burn more calories than you take in, you lose weight. Now you could argue for healthy calories vs unhealthy calories but we’re just talking about weight in this example and weight is just calories in vs calories out.
One “cheat day” can ruin weeks of dieting. In a similar manner, one “cheat trade” can ruin weeks, months, or even years of proper disciplined trading. If you want to find long term success in the markets, you cannot afford “cheat trades” that don’t follow your rules.
Achieving peak fitness requires a commitment to following a routine. The same is true with trading. You cannot afford to take a week off because you were “too busy” or “too stressed.” If you take a week off you are that much further behind in reaching your goals. That doesn’t mean you have to be always trading, but it does mean you have to be always learning and paying attention to the market. It only takes 10 or 15 minutes a day to review the market and monitor your portfolio. Make the time and make it happen or you have no one to blame but yourself if you fall short.
One of the biggest dangers to any fitness routine is the risk of injury. There are steps you can take to minimize the likelihood of getting injured. Proper warmups, proper form and technique, and proper cool down and rest periods can all contribute to minimizing the risk of injury.
In trading the risk we talk about is losing money. Proper analytical techniques, management techniques, and position sizing all contribute to helping prevent catastrophic losses in your portfolio.
Long Term Goals
Your health and fitness should be an ongoing process. Most people who sign up with a personal trainer are looking to accomplish long term changes in their life. There may be short term goals along the way such as running a race or participating in a competition but the real goal is to be as healthy as possible long term.
Trading should be approached the same way. A focus on only short term goals such as weekly or monthly returns can skew your perception of your own success and lead to emotional mistakes. You are probably going to have short term setbacks in trading just like you would in a fitness routine. Keep in mind that you are in this for the long run. A focus on annualized return goals is a great way to keep things in perspective and can help you better handle the short term setbacks.
Just like anything else in life, if you want to be a successful trader it is going to take discipline, the commitment to developing a routine, risk control, and a focus on your long term goals. Enjoy the process, have fun, and make money.