This is the story of a trader I know. I'd like to tell how he started; then I'll ask you to guess how his story actually ends.
A young man from New York is determined to make his living trading the financial markets, so he begins the arduous journey. Success comes quickly. He manages to string together a couple of years of respectable returns.
His confidence builds. He assumes he beat the odds.
In his third year, his success exceeds even his own heightened expectations. His determination has paid off. He's doing what he set out to do -- and he's doing it well.
Riding high into his fourth year, the market begins to turn.
And, as it inevitably does, his flawed assumption finally bites him in the ass. Hard. The bull-market wave he seemed to ride so effortlessly was GONE. Just like that. Gone with it was 70% of his trading capital.
Now it's your chance to participate. Please guess which of the choices below is the true end to this story.
a) Down but not out, he reflects on what brought him success in his first three years. He believes the market has to snap out of it soon. If he can just regain his confidence, the market will return to normal. He'll be back in the saddle. But, alas, the market promptly teaches him an even harder lesson about what "normal" really is. Within a few months his remaining capital -- and his dream of trading for a living -- disappear.
b) Shocked at how his plan went so wrong, and afraid it may turn much worse, he gives in. He hangs it up and bids the market a not-so-fond farewell. He likes to say he had a helluva ride, and that he'll give it another go-round someday... but he doesn't really mean it. The market beat him.
c) It dawns on him that he doesn't truly know what he's doing. He hadn't been trading successfully those first few years; he was merely surfing the right side of a trend. He decides to start over. His new method emphasizes self-discipline to manage his emotions, and technical analysis to manage his trades. At last he begins to trade for a living.
Truth is, there are plenty of stories about real-life traders that begin this way. What makes this one worth telling is that it ends in c).
The trader is named
Dick Diamond. His story begins in the mid-1960s, and it really hasn't ended -- he's been at it for 45 years (and counting).
Here's what can be the best part of Mr. Diamond's story for you:
A few times each year, a small group of traders gather to spend four full days with Mr. Diamond. They soak up as much of his hard-won trading knowledge as they can.
Mr. Diamond's next session will be November 6-9 in Chicago.