Acting and Trading

[Originally posted: Sunday, November 05, 2006 9:43 PM]

I think that an analogy between acting and trading is apt.

Both industries have very low barriers to entries. You do not require any certificate, qualification, degree or education to enter either industry. Of course, education will improve your chances of success in the industry but by no means guarantee it.

A trader needs some capital to open an account and certain equipment, accounts and subscriptions to execute trades. An actor needs transport to get to auditions and needs to survive between jobs. Both he aspiring trader and actor can supplement their incomes and passions by doing part time or shift work outside of regular working hours. The hours that you need to make yourself available for the job you really want to do are similar. Auditions and most acting work takes place on a 9 to 5 schedule from Monday to Friday which is when the markets are open. The obvious exception is when you're trading a market outside of the time zone that you live in. I know that there are some Australian traders trading the American markets and work from midnight to 8am. Not the most sociable of hours.

Both industries appear to have the same levels of success for the same percentage of new entrants. It is often quoted that 80% of traders lose money and eventually disappear from trading. I would imagine that in acting it is the same. Of all the new comers to the industry you will probably find the same number dropping out at the same rate that traders drop out. There will be plenty of aspiring actors forced into alternate industries due to the economics of needing to make a living. Likewise with trading. In both industries there will be a number of actors and traders that find moderate success. Some of these people will just be able to eek out a living while others will make a comfortable or good living out of it. Finally you get the minority in these industries who become stars and are the Tom Cruises of acting and the George Soros' of trading.

The reason that I am drawing this analogy is because I think that it is easier to imagine your career path and the success or failure of it in terms of acting rather than trading. If I asked you about your opinion of yourself or ability to make a living out of acting what would you say? Would you say that you needed acting lessons first or are you ready to leap in and do it? Once immersed in this industry (film, TV, and entertainment) how successful do you think you will be? Will you reach the type of stardom that Harrison Ford has achieved or are you more likely to be another Justine Smith? Who? Exactly!

With that analogy in hand let's turn back to trading. What do you need to do to prepare yourself before you enter into the trading world? Do you need to learn some stuff before you start trading? If so what?

What about those traders who are already in the trading world and have discovered that they are no longer profitable after several (very) profitable years.? They are like actors that have lost their allure and need to re-invent themselves. A bit like Tina Turner did after her career took a dive. She re-invented herself and came back bigger than ever. The successful trader who has lost his edge needs to re-invent his style. What has change? Does his strategy need working? For example, did he trade the turtle system and has he discovered that this system no longer works? If so, is it the system, the set of entry and exit rules, his money management, the hours that he works, the amount of capital that he's employing, or something else that has affected his profits?

John Wayne was a bit part and B movie actor for about 15 years before he hit the big times. He continued to plug away at his profession before he reached stardom. Even after he was a star he was frequently broke because of his lifestyle. An aspiring super-star trader needs to do the same thing. Plug away day after day, week after week, and year after year learning the craft.

The movies and markets will continue to be here for hundres of years after we are all dead and the rules for success will be the same in both these industries. Hard work, very hard work will get you there.