This question has been bothering me for some time. Since the vast majority of traders lose in the long run, isn’t it a waste of time to spend thousands of hours understanding something (the market) that may never bring us the wealth we desire?
As is commonly known, in order to start systematically earning money, it is necessary to learn theoretical issues and, most importantly, test them in practice.
Hundreds and sometimes thousands of hours must therefore be devoted to charts, books or at seminars and training sessions.
In the 1990s, at the Berlin Academy of Music, under the leadership of psychologist K. Anders Ericsson, research was conducted with the aim of finding an answer to the question “Is there such a thing as natural talent?”
On their basis, an assumption was made that in order to achieve the mastery level in some field / specialization it is necessary to devote 10,000 hours for this purpose.
The results of this research were popularized only in 2008 by Malcolm Gladwell in his book “Beyond the Scheme”, which indicates that the awareness of the 10,000-hour rule gives us much more room for maneuver and make informed decisions related to, for example, the professional life of ourselves or our children.
As calculated by neurologist David Levtin:
“Ten thousand hours roughly corresponds to three hours of exercise a day or twenty hours a week for ten years.”
“It seems that our brain takes such a long time to learn everything that needs to be done and to become truly proficient in a given field”
Returning, however, to the research itself …
To achieve the master level, you should spend 10,000 hours perfecting a given specialty. So what about people who have the so-called “straw enthusiasm” and, despite sincere intentions, will quit after some time?
As I mentioned in my previous column, each of us is different, each of us has a different character, ambition and determination. Research conducted by Ericsson allowed for the categorization of all subjects into three groups.
- people who reach the master level
- people who will be talented in a given field, but will not stand out from other professionals
- people who will never achieve the master level and will focus on teaching others
As it turned out later, future teachers devoted to the age of 20 about 4,000 hours of practice, about 8,000 gifted, and people who had just spent 10,000 hours achieved the master level.
One fundamental question remains… does the 10,000-hour rule mentioned above work in every field and in every industry?
In order to be able to answer this question, it would be necessary to conduct detailed research, which seems almost impossible for strictly technical reasons.
But let’s focus on the markets …
So can we compare speculation in financial markets to other professions?
In my opinion NO.
The basic difference that appears when comparing trading with other professions is that each or at least most of the professions are based on rigid rules and theoretical values, after which we become experts and learn.
In the case of trading, even if we know the most hidden secrets and secrets of great investors, we must take into account that financial markets are not a piece of wood that can be planed and subjected to specialist processing, it is also not a car that we can hammer and polish … markets it is definitely a much more complex structure that reflects the sentiments and behaviors of many people around the world and which direction the market is going depends on many people and their decisions that we are not able to predict.
When it comes to trading, simply mastering technical or fundamental analysis will not make us suddenly profitable traders. One of the most important factors and what makes it the most difficult to achieve systematic profits is psychology. At this point, I recommend that you read the Mark Douglas’s book “In a trance of investing” that opens the eyes of even seasoned traders.
Is it worth investing in Forex?
To answer the question at the beginning of this column: is it worth it? There are two ways of answering. On the one hand, it is not worth it, because we are not sure that we will not lose everything and will not be left penniless….
On the other hand, if we do not try and find out by rejecting all possible solutions at the very beginning, what will we achieve in life?
As prof. Bartoszewski: “There are things in life that are worthwhile, and there are things that are worthwhile, and not always things that are worthwhile, and not always things that are worthwhile, are worth.”
So it might seem that it is not profitable to waste many years on education and gaining experience, because for an average trader relatively systematic and regular profits appear after 3-5 years and most people want success quickly, here and now. Unfortunately, in order to earn relatively stable earnings, you must first achieve a high level of advancement. On the other hand, gaining knowledge and understanding of capital markets allows you to gain knowledge about the world of finance and the processes that affect our lives. What’s more, by gaining proficiency in these matters, we give ourselves a chance for really good, demanding and interesting work.
Therefore, I believe that it is not only worth it, but it is also worthwhile to spend time learning and understanding capital markets.
If only because the knowledge and understanding of the rules of the functioning of financial markets can open the door to previously unattainable professions, thanks to which even if we find out after some time, that trading is not a test of what we would like to do professionally, there is always knowledge that we can use for another purpose, such as changing jobs.
Forex is not only a way to financial freedom, but also to personal freedom.
There is a general belief among the wider society (at least the one in which I am involved) that people who are professionally involved in investing must spend whole days and sometimes even nights to be able to earn effectively.
There is nothing more wrong. There are many possibilities to reconcile trading with the implementation of your passions.
You can read more about this in one of my previous texts, in which I described 4 ways how to combine trading with full-time employment.
You might as well title this text “4 ways to reconcile trading with the realization of dreams and passions” and use these methods for this purpose.
The most important thing in all this is to build our individual investment strategy, which will be consistent not only with our personality and risk tolerance, but also with the time that we are able and intend to spend on investments.
For this purpose, my last column can help you, in which I described in detail the 7 steps on how to build your investment strategy.
Another argument that the latest statistics are also worthwhile, which show that in the third quarter of 2016 as many as 40% of traders made money on the market, which is quite a significant improvement.