In my top 3 books about trading rests Trading in the Zone by Mark Douglas. I found this book to be the most helpful trading book in my earlier days of learning to trade. I find it interesting that one of my favorite books on trading doesn’t have 1 chart, indicator, setup, or any full methodology within its pages. It is almost entirely about individual trader psychology, and I have learned that this is the crux of the trader’s issue. The traders mind, both friend and enemy, both roadblock and engine.
Mark Douglas, in this book, was the first to introduce me to trading in samples. I had heard about it in passing, but never paid any real attention to it as it seemed to me an obscure way to deal with trader psychology. Why not just focus on one trade at a time? For those of you who are not familiar with trading in samples it is a method outlined in the book whereby the trader gives himself a set amount of trades to conduct before he examines the results in depth. The idea is that this will allow a better platform for the trader to think objectively about his/her trades by distributing his emotional involvement with his trading over a "sample" size of trades, say 20 or so, as opposed to making dynamic emotional investments in each individual trade. The question is, does it work?
The United States Currently has a civilian workforce of 154 million people. The current number of actual business owners is a number between 2 and 3 million. This means that out of the 154 million people out there only 2 or 3 million people are calling the shots. The rest of us just go to work every day and take orders. We know our jobs, we don’t make any tough decisions, and then we punch out and go home. It is within this group of drone like individuals that trading most finds its appeal. To the group who feels oppressed by their employer because he must work to pay off his debt, and in some cases, must work to pay down only his interest on overpriced college educations and the ensuing credit card dependent lifestyle that so many have become accustomed to. These people range from professional to entry level. From the intelligent to the simple, but almost none of them are entrepreneurs. Almost none of them have ever told themselves what to do for money. Enter trading ?.
I have often said that the desire for easy money is the number one reason why there are so many who trade markets and the number one reason why there are so few who trade markets. Trading has called many, but chosen few. And I believe this is, in part, for the following reason. In most cases, trading is going from a setting where you are told exactly what to do to make money(day job) to a setting where no one tells you one single, objective way to make money(trading). From a situation where you have almost no control over your day to day activities to a situation where you have total control of your day to day activities. The contrast is often murderous. Many who begin trading think they are moving into a profession in which their objective is to trade the market and derive some sort of income from these activities. Many pay very little to zero attention to one of their biggest hurdles, which is that they first have to learn the art of complete control after having almost none for their entire workplace experience. This is where properly managing individual trader psychology fits into it’s most important and original place. It is the common lineage of all great traders. Sample trading is but one small, but very meaningful part of this bigger picture.
To answer the question, yes, I would say trading in samples does work, and by work I mean helps us to overcome a large obstacle that would impede our ability to find ourselves of sound mind enough to trade the best way we know how. Please don’t make the mistake of assuming that trading in samples will make you a profitable trader, because it won’t. It will simply help move your psychology out of the way so whatever trading skills you do have can come forth and help you be the best trader that you can be. Needless to say these degrees of skill will vary greatly from trader to trader.
Trading in samples helps in the following ways:
1. Enables a division of association by spreading out the emotional investment in our trading over a larger number of individual trades to bypass the volatile emotions caused by either a very good position or a very bad position. This is important because our emotional state will most inevitably effect our psychology, which then in turn greatly effects our ability to properly manage subsequent positions.
2. Allows us to "call a spade a spade" by enabling us to let go of positions that do not work out for us as we do not have our entire emotional capacity invested in any one trade. This is important because we are able to drop bad positions before they have more a negative effect than we had originally anticipated.
3. Puts us in a position to approach the markets in a very objective way through understanding that not any one position holds the answer to whether or not we are good or bad traders.
4. Promotes all of the above which over time will help us to learn a very healthy mindset towards the markets, and this is indicative of true success.
My personal approach is to trade in 20 trade samples and I have seen very much improvement in my trading since I have taken this approach. I consider it one of the "keys" to my success.
Give trading in samples a shot, I think you’ll achieve positive results.
Gabriel Baryard can be contacted through TradingApples