Excitement. Tue Feb 23

I'm still thinking about some of my impressions from the Van Tharp book. The guy's not lacking in ego, he suggests you read the book 4 or 5 times and that you'll pick up on different points each time. Fortunately for him, he can walk the walk and the book does justify multiple readings.
There is a fairly limited psychological section in the book and it gives an example of a self assessment from Tom Basso, a successful money manager. One of the quotes from Basso says, "I certainly don't think of myself as compulsive. I don't find trading exciting at all. It's just a business to me. I look at trading as an interesting brain tease."
I found this slightly irritating because I really enjoy trading, I would do it as a hobby or at least something similar that was challenging mentally. But actually it's a sensible approach and I think I reacted badly because it hit home. What I've been doing is caring too much about the outcome of any particular trade. When I've had my best periods trading I've been willing to accept whatever the result might be.
I've written before about trading statistically rather than focussing on a single trade so that you measure success by how well you stick to your plan rather than by whether any particular trade made money. I've found it hard to put into practice though and it's only by dint of repetition that I've been able to improve in this area. However, one of the things that Tharp does with Basso is to test whether you can make money by using a random entry with the idea being that your money management is far more important than anything else so that even with a coin toss entry it can provide a winning edge.
They found that they could easily do it and somehow the idea has had a liberating effect for me. Rather than fretting too much about the perfect trade selection it has got me much more comfortable with the casino idea where you keep taking the bets because you always have an edge. Given that I spent 10 years as a market maker where much of your business is about capturing edge, you would think that this would be an easy concept to grasp. I suppose the difference is that when you're a market maker you understand that you're trying to make edge. A lot of the trades you take are passive where you're obliged to go one way regardless of any directional opinion you might hold. Obviously you hedge and a lot of the time you don't really care where the stock goes.
When you're doing directional trading, you've had to form an opinion and it can then be harder to accept mistakes. But if you realise that your returns are determined in a small way by your entries and in a large way by your exits and risk management then the importance of your initial opinion is much reduced and it should be easier to take the right follow up action.
We'll see what happens but it was an "ah ha!" moment for me.