The Traders Journal

Ten Timeless Tenets of Trading: A 2,500 Year Perspective

Gatis Roze

Gatis Roze

Author, Tensile Trading: The 10 Essential Stages of Stock Market Mastery

For those of you who pooh-pooh the lessons of history, listen up!  I myself am guilty of being overly focused on today’s web – obsessed with the latest hot stocks, investment technologies and trading methodologies.  But at times, it’s important to challenge oneself to look backwards as an aid to moving forward more effectively.  I did this just recently, and I came away quite astonished.  Ten days in Rome convinced me that I was naively ignoring powerful historical insights that could help me become the ‘Michelangelo of the Markets” or at the very least improve my investing skills. 

Rome captured my imagination like no place before.  I experienced it as the cumulative depository of wisdom from hundreds of generations of some of the world’s greatest scions of commerce and philanthropy, transcendent spiritual leaders and supreme visual artists.

To me, it felt as if I was having conversations across generations with the masters themselves.  I believe it was my commitment to personal excellence in my own little arena that facilitated a willingness to hear what the messages were from those brilliant artists and their magnificent achievements.  With this openness and borderless type of thinking came many satisfying insights – some very personal.  There are ten observations  I’ll be sharing with you in this blog.  The conclusion was obvious.  Life and history can parallel investing and can thereby teach us a great deal about ourselves and trading the markets.  

Here is a typical example.  Even the exalted painter Caravaggio was unwilling to rest on his monumental achievements.  Instead, he was willing to ask the much more difficult and useful question:  “What did I do wrong?”, a query which actually led him to repaint portions of his greatest masterpieces.  How many of us investors could look in the mirror after a 10-bagger trade and ask “What did I do wrong?”  So, here I share my personal takeaways from a sensational holiday in Rome.

Chaos:   It took me a few days to get comfortable amidst the chaos of Rome.  I suspect it would be the same for most people.  The frenetic pace, unfamiliar traffic habits, tight spaces and the sheer hoards of people.  My non-trivial objective was to move from uncomfortable to comfortable, and I found the learning curve here was about 3 days to find a personal normalcy.  

The learning curve in the stock market is somewhat steeper, but much like Rome, an investor must achieve his or her own comfortable space amidst the chaos of the markets.  When in Rome, do like the Romans.  When in the markets, you must find your own comfortable normal.  Until you do, you’ll get run over by a sea of Fiats.

Markets & Guideposts:  Today, central Rome seems overrun with tourists.  Centuries ago, it was a magnet for religious pilgrims.  Today’s tourists have GPS on their smartphones and can find a famous landmark in seconds.  The religious pilgrims of yesteryear, on the other hand, were guided by a series of obelisks – tall stone pillars, typically having a rectangular cross-section and a pyramidal top.   These soaring guideposts (often taken from Egypt) stood as high as the Lateran Basilica obelisk (105 feet) and were strategically located throughout Rome along essential sight-lines, acting as a de facto GPS of the day for pilgrims seeking St. Peter’s Basilica and other important churches along the way.

As modern day investment pilgrims, we also require guidance.  Our methodology acts as our roadmap and GPS, aided by our strategically placed trading obelisks that help us navigate our stock market landscapes.  Without these, you will get lost.  Without these, recurring profits will be harder to find.  If you don’t know what your personal investment obelisks are, we need to talk.

Language:  To say that Rome is an international city is to state the obvious.  Most locals speak multiple languages.  The Swiss Guard who gave us a tour of the Vatican barracks spoke five languages.  Our tour guide was a renowned historian who was learned in the languages of mosaics, frescoes, paintings and sculptures.  My point is that Rome reminded me that venturing out into an arena where one does not know the language is not just a challenge – it is sheer folly.  In the stock market, a similar venturing out can be financially devastating.  If you plunge into trading options, you had better intimately understand puts and calls.  If you indulge in hedging using futures, you better appreciate the language of volatility.  Trade stocks without understanding the difference between market orders versus limit orders and it will cost you money.  Language matters.  Language empowers, be it Rome or the stock markets.

Apprenticeship:  We can debate who the greatest artists might be, but for this example I simply ask you to concede that Michelangelo, Caravaggio and Gian Lorezno Bernini’s artistic output in Rome is clear evidence of their extraordinary genius.  It might surprise some of you to know that all these masters served as apprentices.  Michelangelo started living with a stonecutter when he was just six years old.  Similar situations preceded greatness for both Caravaggio and Bernini.  They achieved mastery through sacrifice, years of learning and practice under the watchful eye of masters.  

In understanding apprenticeships, I find it interesting to note that most great works of fresco (painting with watercolors on wet plaster) may be credited to certain individual masters but were actually team projects by groups of apprentices necessitated by the quick drying nature of frescoes.  

The takeaways from this are that if you are drawn to investing because you envision yourself as a lone wolf, you will spend years fighting the markets to the detriment of your trading.  The probabilities for your success will increase significantly if you embrace mentors, teachers, friends and other investors.  The great ones all served an apprenticeship.  There is no shame in that.  You will become the company you keep, and it will bring out the best in you.  Do not, however, believe you’ll achieve consistent profitability quickly.   You will have to put in the time, effort and apprenticeship as most of us have before you become the overnight success you envision.

Embrace Change:  The canvas of Rome that is before you has compressed thousands of years of history and placed it all side-by-side for easy comparisons.  These regular disruptive historical cycles would challenge the convictions of any buy-and-hold investor.  It’s always been “out with the old – in with the new.”   Throughout Rome, we see infinite examples of “new” structures built from the stones of a previous edifice.  Even St. Peter’s Basilica in the Vatican was placed atop the old basilica that had been built by the Roman Emperor Constantine.  From my hotel window on the Piazza della Minerva, I gazed out upon the ancient Pantheon which was stripped of its original veneer by builders who used the beautiful marble for newer building projects elsewhere.  

Granted, investors would need my vivid imagination to compress thousands of years of history into a tradeable timeframe, but there are many examples of large corporate edifices with seemingly wide operational moats that unimaginably faded into history.  Nevertheless, the metaphor of Polaroid, Pan Am and Enron being stripped of their veneer is my point.  As an investor, whatever timeframe you embrace, you must also embrace the inevitability of “out with the old, in with the new.”  Change in Rome was often violent and brutal – not too dissimilar from our modern stock markets.  I am also not just referring to changing your equity positions as required; I’m speaking about change in adopting new tools and adjusting your investment methodology.  Change in embracing smartphone apps that facilitate alerts.  Change in your mindset from being a buy-and-hold investor.  The stock market and investing by its very nature is based on disruptive behavior; you must accept this reality and, in fact, embrace these changes.

Tune in next week for my final five historical investment tenets.

Trade well; trade with discipline!
-- Gatis Roze 

P.S. Click HERE for information on my future appearances & seminars.
October 17th, 2015- ASSET ALLOCATION WORKSHOP with Gatis Roze & Chip Anderson.

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Gatis Roze
About the author: , MBA, CMT, is a veteran full-time stock market investor who has traded his own account since 1989 unburdened by the distraction of clients. He holds an MBA from the Stanford Graduate School of Business, is a past president of the Technical Securities Analysts Association (TSAA), and is a Chartered Market Technician (CMT). After several successful entrepreneurial business ventures, Gatis retired in his early 40s to focus on investing in the financial markets. With consistent success as a stock market trader, he began teaching investments at the post-college level in 2000 and continues to do so today. Learn More