I stumbled into a gift shop full of tchotchkes today. It was one of those retailers with endless trinkets and specialty items that encourage you to revisit your youth and marvel at someone else’s creativity. I became fascinated by one of those intricately detailed Russian “Matryoshka” – the wooden nesting dolls of decreasing size placed one inside another. Perhaps because the markets were particularly challenging today, I found myself getting pensive about the parallels of my life as an investor to my unbundling of these nesting dolls. I’ve always felt that investing is like peeling back the layers of an onion one-by-one, and therein lays the parallel. I realize that like all other investors, my journey has followed the path of the 5 enlightenments as I peeled back my personal investment onion over the years.
I started as a “novice” with a potpourri of random investment tools. I progressed to an “advanced beginner” where I added some selling methodology to the mix. Next, I moved into the “competent” realm where I embraced the importance of the investor self. From there, I transitioned to the “proficient level” with a smaller set of trusted trading tools. Finally, I arrived at the “expert level” where my self-discipline was maintained and I allowed my intuition a seat at the table.
Despite what we each want to believe about our abilities, there is no pole-vaulting here or jumping the queue. We must all pass through each of the previous 4 enlightenments to arrive at the “expert level”. Unlike many of my previous blogs about what I have learned trading the markets, this one highlights 5 pivotal events that happened to me and provided catalysts that drove my journey ahead and allowed me to move forward to transform myself into the next investor stage.
- I had been diligently attending investment conferences and money shows all across the country, sponging up each and every nugget of wisdom. It was after a 3-day show in Las Vegas that an epiphany struck. I realized that I had accumulated an unwieldy collection of investment tools that held very little promise of profitability. At these conferences, the talking heads never really intended to turn me into a successful investor. They merely strove to convince me that investing was far too complicated for me to do myself. Their not-so-subtle alternative was for me to buy their newsletter, their mutual fund or management services and let them do it all for me.
- I energetically began to consume books on investing. The good fortune at that time was that I had crossed paths with a gentleman who managed Stanford’s endowment and he shared with me a powerful axiom that has served me well for many decades. He said “Never read any investment book unless it is recommended to you by at least two other investors you trust and respect.” I therefore plowed through all the classics and the recommended “good stuff” and for the most part, I did not get sidetracked or misinformed by so much of the truly damaging garbage which parades itself as investment wisdom.
- I would be woefully remiss if I did not acknowledge Dr. Hank Pruden at this point. He was an educator, a mentor and a role model for me as I took his Wyckoff investment classes at Golden Gate University in San Francisco. During this period, what galvanized me was the realization that I wasn’t driven by the money but by my vision to gain mastery over myself as an investor and mastery of a profitable trading methodology. It was this vision that continues to motivate me to this day.
- Sometimes in life you just find yourself in the right place at the right time with the right people. Fortunately, I realized this about that same time as several others, so we built a community. The group of investors who came together in Dr. Pruden’s classes were wholly unique. We learned the Wyckoff method together, we studied and passed our CMT certification together, we formed a monthly investment club together, and we hired famous trading psychologists to work with us. It’s not my place to name names, but many in our group went on to truly distinguished careers as managers of hedge funds, mutual funds or became famous traders. Years later, my Christmas card list still reflects our unique connections. My fellow traders taught me another essential insider secret during these years – one that has allowed me to befriend a wide variety of successful investors over the years. It’s the trader’s version of the Rule of Reciprocity. It merely says that if you are always a taker and don’t bring to the table something of value for the other traders, you will soon be ignored and your education will cease. Traders don’t warm up to takers.
- It was soon after this period that another eureka moment happened. My investing tool kit came together and still exists in much the same configuration today. Woodrow Wilson once said that if the only tool you have is a hammer, you tend to see every problem as a nail. My challenge was the other extreme. I had so many tools that if I were a hardware store, I’d look like Home Depot! Any fool can complicate a methodology. It takes experience and clear thinking to move in the other direction. Investing is often made overly complicated because human nature tends to want to make it so. Overcome this and you’ll discover one of the market’s insider secrets. Low and behold, once I embraced this realization, my investing results reflected this adjustment to simplicity almost immediately. To this day, I advocate an essential tool kit of 10 indicators and no more. This seems to be the “sweet spot” for most investors.
Therein lies a portion of my journey and a few key personal passages along the way. In summary, I’d like to suggest that patience is a key ingredient with every passage. Patience is what allows us each to work hard at our craft for years until that moment in time when it all comes together and we achieve “overnight success.” So it might seem to the casual novice, but of course we know the truth.
Trade well; trade with discipline!
-- Gatis Roze