Boot camps like the Army's in Fort Leonard Wood, Mo., are becoming kinder and gentler, according to a recent article in the Wall Street Journal. In an effort to decrease the number of wash-outs from boot camp, the Army has dramatically changed the way it trains recruits:
Once-feared drill sergeants have been ordered to yell less and mentor more. "Before, our drill sergeants' attitude was 'you better meet my standard or else.' Now it's 'I am going to do all I can to assist you in meeting the Army standard,'" says Command Sgt. Maj. William McDaniel.(Wall Street Journal, Feb. 15, 2006)
Traders need to have discipline, too, says Bob Prechter, the kind that makes you tougher in the face of adversity. If he had his way, all traders would go to their own personal boot camp before they started trading. In fact, he has found that the best traders are often ex-Marines. Tough and disciplined. To learn more about how discipline makes for better trading, read this excerpt from Prechter's Perspective.
Bob Prechter's Six Secrets of a Successful Trader
1. Find a method. 2. Be disciplined. 3. Get experience. 4. Accept responsibility. 5. Accommodate losses. 6. Accept huge gains.
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The No. 1 requirement for being a successful trader is to get a method, such as the Wave Principle. What's the second requirement?
Bob Prechter: No. 2 – Be disciplined. You need the discipline to follow your method. Among the true professionals, this requirement is so widely understood that it's almost a cliché. Nevertheless, it is such an important cliché that it cannot be sidestepped, ignored or excepted.
Any system with a decent track record will be profitable if you apply it rigorously and honestly. As I indicated before, using the 10-day advance/decline oscillator with reasonable parameters, you can make money seven times out of 10. But very few people have the discipline to do it. Discipline is much more difficult to obtain than a method.
Do you mean that a well-constructed system will work, but the investor often doesn't?
Bob Prechter: Well, certainly a lot of work is required. But that's not the only aspect of the task. Lots of workaholics fail at trading. What you need is the guts to do what is right when it feels wrong. That takes immense courage and discipline. It struck me one day that among a handful of consistently successful professional options and futures traders of my acquaintance, three of them are former Marines.
The few, the proud?
Bob Prechter: The few, for sure! Among my acquaintances anyway, this is a ratio way out of proportion to the ratio of former Marines as a percentage of the general population. This anomaly implies to me that discipline is extremely important. At some point in their lives, these guys volunteered to serve in an organization that requires discipline and stamina. These people knew they were "tough" and wanted the chance to prove it. Being "tough" in this context means having the ability to suppress a host of emotions in order to act in a manner that would cause most people to shrink back in fear.
But you don't seem like the Marine type.
Bob Prechter: No, I'm not. But years ago while attending summer school with Georgia's Governor's Honors Program, I was given a psychological test and told that one of my skewed traits was "tough-mindedness." I didn't exactly know what that meant, but after trading and forecasting the markets since 1972, it is clear that without that trait, I would have been forced long ago to elect another profession. The pressures are enormous, and they get to everyone, including me. If you are not disciplined, forget the markets.
Can anyone follow rules if he or she puts a mind to it?
Bob Prechter: A lot of people will tell you that they have that discipline, but when it comes to actually doing it, they don't. The markets aren't merely an intellectual exercise. They're an emotional one as well. By the time the emotions have eaten away at you for several months, it's even physical. Trading is incredibly difficult to do, and it's one reason I do not like trading.
The most important factor in the market strategy is learning to stand fast if your system tells you to do so, even when the news, your friends and the tape are screaming at you to do the opposite. Outside forces don't really affect the market and never have. People hear horrible things on the news – the assassination of President Kennedy is a good example – and they panic and sell. A crisis may influence where prices go that afternoon, but not overall. You have to learn to avoid that natural human reaction to what looks catastrophic or hopeful. Stick with your system; never second-guess it; always follow it.
Does discipline mean you should stick to one or two markets?
Bob Prechter: Not in my opinion. One of the most important characteristics of a successful commodity trader is the flexibility to go into any tradable market. If traders are "married" to particular markets, they may find themselves forcing a trade where none exists. The flexible trader can ignore 80% of the charts that are saying nothing and concentrate on the 20% that are calling for action. On the other hand, if one's method is market-specific to some degree, then specialization can add value.
- Next installment: Get experience