I took the day off in honor of Veterans Day.  Instead, I penned this short essay that answers the question:

CAN SUCCESSFUL TRADING BE TAUGHT?

I believe successful traders need three elements: 1) a certain level of inherent talent or aptitude which they either have naturally or don’t; 2) an understanding of some basic trading concepts (or as I refer to them with my students, “Cosmic Truths of Trading”) which can be learned from a mentor or acquired through personal trial-and-error experimentation; and, 3) the ability to keep in check the powerful emotions of Fear and Greed.  As with the basic concepts, techniques for emotional control can be learned from a teacher or discovered personally.  However, the emotions are so strong and their management so often counter-intuitive that this is frequently where the services of a mentor can be most valuable.

Regarding inherent ability, Neuro-Linguistic Programming (NLP) teaches that our behavioral motivation comes from a combination of two opposing forces.  We tend to move toward pleasure and reward, or we move away from pain and punishment.  We are all affected by both, but our basic personalities tend to lie closer to one pole than the other.  In my experience the moving TOWARD people make better traders.  The moving AWAY FROM people will often be overly conservative in their pursuit of gain, jumping on profit at the first opportunity.  Yet, when they end up in a hole as they so often do, they will take extraordinary risks just to “get back to breakeven.”  My opinion is bolstered by such sayings as, “Fortune favors the brave,” “Act boldly and unseen forces will come to your aid,” and, “Nothing ventured, nothing gained.”  Remember, Babe Ruth led in homeruns, but also in strikeouts.

Regarding my Cosmic Truths of Trading, most people of average intelligence can grasp the concept of predicting price movement by looking for alignment of momentum on multiple time frames.   However, there are dozens, if not hundreds, of indicator combinations that can be used to demonstrate this phenomenon.  The mentor’s favorite chart template may work for the student, or it may appear as a totally confusing jumble of lines.  Two traders looking at that same chart do not necessarily see the same thing at all.  This reality has been recognized for centuries.  Consider eyewitness testimony.   There is a jury instruction given by the court in virtually every civil or criminal trial regarding how to evaluate witness credibility.  It reminds us that two people can see the same event, give two completely different versions thereof and yet both believe theirs is the truth.  What does this mean for trading?  Just that successful traders must discover which combination of visual cues will catch their eye and register on their brain the best.  One size does not fit all.

Regarding how to control Fear and Greed, the Cosmic Truth of Trading most often violated is “let profits run, cut losses short.”  As stated above, moving AWAY FROM people are particularly susceptible, but we all succumb one time or another.  For myself personally, I hate to lose so I will tolerate a fairly large adverse excursion before pulling the plug.  Frequently I can snatch victory from the jaws of defeat by so doing, but not always.  Here is the bottom line on emotion control I teach my students.  Fear and Greed are deeply hardwired into our brains.  We can never outgrow their influence.  But, we can train ourselves to follow a set of rules so religiously that Fear and Greed don’t have a chance to get their collective feet in the door.   Greed tends to make us set profit targets too far away and Fear has us trailing our stops too close.  So, rather than rely on hunch, gut feel or trader’s intuition, we must use the inviolable laws of mathematics and two inventions from the fertile mind of Welles Wilder, founder of the Delta Society and author of 1978’s New Concepts in Technical Trading Systems.  I set targets with the Average True Range and trails stops with the Parabolic SAR.  Practice using those until doing so becomes second nature and Fear and Greed will be shut out.

So to recap, can successful trading be taught?  Yes, provided: 1) the student is more of a moving TOWARD person, 2) has internalized and personalized the basic concepts of technical analysis and money management, and 3) can substitute mathematics for emotion without second guessing.