Here we are at Rule # 10, the last rule! It’s been a journey through Lewis Borsellino’s self-made commandments. Based on nearly 20 years of trading experience as the top local in the S&P pit and many more years since on the screen, his rules provide guidance for the common mistakes all traders encounter at some point in their development. Behavioral changes, both to build successful trader routines, as well as suggestions aimed to combat the many psychological pitfalls traders experience, rounds out his holistic approach.
“You can break a rule and get away with it once in a while. But one day, the rules will break you. If you continually violate these rules of trading, you will eventually pay for it with your profits. That’s the unbreakable rule. If you have trouble with any of them, come back and read this one. Then read it again.” Lewis Borsellino
Challenge # 10 – How do I pull all this information together?
Lewis’s approach is holistic. We looked at his rules one at a time moving through body and mind, covering both psychological and conceptual trading paradigms. He notes trading is 90% psychological. Yes, you need risk management, good analysis but without the right mindset, the other 10% doesn’t matter. This is why all of Lewis’s rules contain a psychological component, making his ‘10 Rules of Trading’ a timeless classic. “One thing is for certain: Where there is a market, there will be a trader. Where there is risk, there will be a hedger. Where there is opportunity, there will be a speculator.” These rules will be as true and insightful in 20 years as they were 20 years ago.
Lewis says “I became a successful trader because I knew myself. I understand both my strengths and my weaknesses. I mastered myself with cast-iron discipline that allowed me to stomach risk and handle failure.” Inexperienced traders think they are making a commitment to a business; what all traders who survive and then thrive discover is that the process of becoming a successful trader is actually much more than a business decision and more of a journey of self-discovery. While anyone can participate in the business of trading, only a small percentage will find success as traders.
Lewis says he can handle failure. Imagine one of the most successful pit traders in the world explains his success in trading partly because he had the ability to handle failure. This seems to be a common trait among successful people, whether it’s Michael Jordon, “I’ve missed more than 9,000 shots in my career” or Thomas Edison, “I have not failed. I’ve just found 10,000 ways that won’t work.” Successful people are not afraid of failure but rather see failure as a necessary part of success. Can you handle failure in order to achieve success?
Solution # 10 – Understand moving from novice to expert is a process.
There is a learning model I studied while at Rush University Medical School that details the psychological states involved in the learning process and is as applicable to becoming a successful trader as it is to becoming successful in any endeavor. There is a natural progression from novice to expert. The novice doesn’t know a problem exists, the expert has mastered the problem and no longer thinks about the process. Below are the stages we either become mired in, falling short of our goals, or work and progress through to achieve the goals we set out for ourselves. You will learn all the rules of trading while in level 1, but you will not have fully integrated their essence until you’ve reached the highest levels.
Level 1 – Unconscious incompetence, you are not aware the problem exists.
Level 2 – Conscious incompetence, you’ve become aware of the problem. Making mistakes is part of the learning process at this level.
Level 3 – Conscious competence, you find the solution for the problem. Heavy concentration is required for the steps in executing the solution. Practice is repeated.
Level 4 – Unconscious competence, you are living the solution. The solution has become ‘second nature’ and is easily preformed.
A later addition to the model is the 5th stage and refers to an overall mastery where instinct and reflex is all that’s needed for execution, as the holistic integration of the parts results in the successful trader.
Next time you sit down at your computer to trade your plan, remember, it’s a learning process and it’s not over till you are satisfied you have reached your highest level of competence.
We hope you’ve enjoyed learning Lewis’s 10 Rules of Trading and found them helpful. Be safe, use a stop… and happy trading!!!
Resources – The Day Trader, From the Pit to the PC by Lewis Borsellino is a totally inspirational and enjoyable read with great trading wisdom found throughout the book. Why will you enjoy this book? As Lewis says and every trader I’ve polled can confirm, “It’s what I call ‘trader empathy‘. Nobody can understand the exhilaration of the win or the agony of the loss like another trader.” In Lewis’s own humbling way he tells his story of achieving Stage 5.
Here’s a website with hand signals used in the pit. Pretty cool stuff.
Sign up for FREE to get market updates from Lewis and team!
ManOverMarket Blog 