Ray Dalio nails the education system well: “I believe that our society’s ‘mistakephobia’ is crippling, a problem that begins in most elementary schools, where we learn to learn what we are taught rather than to form our own goals and to figure out how to achieve them. We are fed with facts and tested and those who make the fewest mistakes are considered to be the smart ones, so we learn that it is embarrassing to not know and to make mistakes. Our education system spends virtually no time on how to learn from mistakes, yet this is critical to real learning. As a result, school typically doesn’t prepare young people for real life—unless their lives are spent following instructions and pleasing others. In my opinion, that’s why so many students who succeed in school fail in life.”
If you got mistakephobia in trading–you will fail. More.
“We do target training,” explains Cameron McCormick, Spieth’s longtime swing coach. “Jordan’s go-to range drill is to pick a left and right boundary — say, a bush and a flag — and envision a football goal post. He tries to land a percentage of his shots between the ‘posts.’ To mirror playing conditions, the goal-post width grows as he goes from his wedges — say, 10 yards wide — up to his driver.”
2. Know How to Miss:
“At the Masters, our plan was to attack the course while knowing where not to miss,” McCormick says. “On No. 3, a 350-yard par 4, Jordan hit hybrid off the tee to set up a full, spinning wedge from 100 to 115 yards out. That way, he could be precise with his approach and avoid the deep trap and the false front — two places you just don’t want to go.”
3. Debrief Post-Round:
“Jordan is great at post-round reflection. He detaches himself from the emotion of the day and asks, ‘What did I do well? What do I need to work on?’ This gives him an unbiased look at his performance, so he can keep improving.”
Source: Mark Broadie, “What can you learn from a 20-year-old? Plenty. Jordan Spieth’s well-rounded game has made him a PGA Tour star.” June 23, 2014. See http://www.golf.com/instruction/jordan-spieths-well-rounded-game-has-made-him-pga-tour-star.
William Eckhardt, the great trend-following trader, has spoken forcefully about the idea of not having a memory in your trading:
“Suppose two traders, A and B, are alike in most respects except the amount of money they have. Suppose A has 10 per cent less money but he initiates a trade first. He gets in earlier than B does. By the time B puts the trade on, the two traders have exactly the same equity. The best course of action has to be the same for both of these traders now. Mind you, these traders have very different entry prices. What this means is that once an initiation is made, it does not matter at all for subsequent decisions what the entry price was. It does not matter. Once you have made an initiation, what your initiation price was has no relevance. The trader must literally trade as though he doesn’t know what his initiation price is.”
In 2013, the Nobel Prize in economics went to three men. One of the recipients, Robert Shiller, is a professor at Yale University known for showing that markets are inefficient. Another was Eugene Fama, a professor at the University of Chicago known for his advocacy of market efficiency. (The third was Lars Hansen, also at the University of Chicago.) This leads to the first point worth stressing: to be an active investor, you must believe in both inefficiency and efficiency. In other words, you have to think that both Shiller and Fama are right―just not at the same time. Naturally, if markets are perfectly efficient there’s no reason to try to beat them through active management. But it’s also true that there’s no reason to try to beat the market through active management if you think markets are always inefficient. That’s because even if you are savvy enough to buy a dollar for fifty cents, there’s no reason to believe that the price and value will ever converge in a perpetually inefficient market.
My guest today is Emma Seppala, the author of “The Happiness Track: How to Apply the Science of Happiness to Accelerate Your Success.” She is the Associate Director for the Center of Compassion at Stanford University. Emma’s work isn’t based on theories or common knowledge, there is a tremendous amount of neuroscience backing her work.
The topic is her book The Happiness Track: How to Apply the Science of Happiness to Accelerate Your Success.
In this episode of Trend Following Radio:
Benefits of happiness
Stresses in life
Controlling your mind
Happiness in college
Cultivating resilience
Tapping into the opposite of fight or flight response
Impact of different breathing techniques
Living in the moment of now
Authenticity
The flow state
Activating creativity
“Self criticism is basically self sabotage.” – Emma Seppala
Hello there Michael, I’m a 20 year old Swede who really likes trading, as well as your work. First of all I would like to thank you dearly for your great podcasts and books. It surely is an entire joy every Monday & Friday when a new podcast comes out. More important, it seems quite amazing that you share more or less all the fundamental views I hold toward the world. Actually, I, just like you, read Ayn Rand at an early age which changed me a lot. And finding you who preserves those views is fantastic! Since I respect you so much I would like to ask you some things about trading. Now, I know you are really in to the trend following path, and I agree on most part of your analysis towards it. However, I believe that the fundamentals sometimes can be really important as well. For instance, one strategy that has served me well has been to short gold whenever the market tends to believe 3-4 rate hikes is on the play, and then go long on gold whenever the market tends to believe the rate hikes is off the table. This of course is related to the gold being priced in USD and then obviously gains when the USD fall. Now that might not be a fundamental strategy but more of a “market sentiment orientated strategy…” However, I wonder, do you ever use any fundamental analysis or do you only use technical tools such as SMA & EMA? Least but last, I would like to ask you if it would be possible to hold an interview with someone from Zero Hedge?
“Sometimes”?
“Tends to believe”?
“Whenever”?
“On the play”?
Everything I just put in [bold] is guessing? No specificity? There are exact rules with precise numbers? Or just intuition or hunches? See the problems here?
Response:
I really don’t get why you need to be so mean? Just because you need to have an 100% absolute concrete trading strategy doesn’t mean that everything else sucks. It’s just pathetic to respond to me like that, so regarding my initial question, never fucking mind!
—
This interchange offers observers a great chance to go investigate the work of Daniel Kahneman. Read my Email Debate on Drawdowns.
The following story passed along from an associate is “pure Seykota”:
“I attended a day-long seminar in February 1995 in Toronto, Canada where Seykota was one of the guest speakers. The WHOLE audience peppered Seykota with questions like: Do you like gold, where do you think the Canadian $ is headed, how do you know when there is a top, how do you know when the trend is up etc.? To each of these, he replied: ‘I like gold—it’s shiny, pretty—makes nice jewelry’ or ‘I have no idea where the Canadian dollar is headed or the trend is up when price is moving up, etc.’ His replies were simple, straight-forward answers to the questions asked of him. Later, I learned through the event organizer that a large majority of the audience (who paid good money, presumably to learn the ‘secrets’ of trading from a market wizard) were not impressed. Many felt they had wasted their time and money listening to Seykota. Seykota’s message couldn’t be clearer to anyone who cared to listen. The answers were found in the very questions each person asked. Don’t ask, ‘How do you know the trend is moving up?’ Instead, ask, ‘What is going to tell me the trend is up?’ Not, ‘What do you think of gold?’ Instead, ask, ‘Am I correctly trading gold?’ Seykota’s answers effectively placed everyone in front of a huge mirror, reflecting their trading self back at them. If you don’t even know the question to ask about trading, much less the answers, get out of the business and spend your life doing something you enjoy.”
How would you have reacted to Seykota’s speech? Walk out or be curious? Think about it.
Feedback in:
I wanted to reach out and thank you for the books you have written. I will admit I’ve read them all from obtaining them through the library system, but I now believe I will buy them as resources to reference. The “Trend Following” philosophy clicked immediately with me and listening to your podcast has really enlightened my mind considering I’ve been typically listening to Motley Fool for my job as a Financial Analyst. In a short period of time I feel I can see through the garbage that is filling those podcasts. I still listen to keep up with my CFO, but feel as if I’m a lone wolf at work with a strategy that none of them could ever understand. Within weeks of reading on Ed Seykota I have already programmed an entire Google Doc to automate my buy/sell/risk/data pull just by typing a ticker for what I want to trade. Kudos to you for following this path and providing the knowledge to us for consumption. I hope to continue to follow your path as you continue. If you are ever in Colorado feel free to check-in with me and see whether I’ve hit life changing levels yet.
