Losers Have Goals, Winners Have Systems
by Michael Sankowski | June 27, 2012
Copyright (c) 2012 Trend Following 101
The title of this post is a quote - and you won't believe who said it!
It's not a Legendary Trader or a Type-A Billionaire, or even an elite athlete. It's someone you'd never expect to talk about losers and winners in such a way.
But before we get to discovering who believes this radical statement, let's explore more about why "Losers have Goals, Winners have Systems"
I've hammered the idea of learning the basics of trading in order to become a good trader, over and over again. Most people think there is some secret to profitable trading, and yes, there are techniques you can use to become a better trader.
But before you learn those techniques, you need to learn how to manage a trading position, how to enter orders and monitor them, how to calculate risk - there is a long list of basic tasks you need to master.
Not everybody wants to put in this much effort - but some people do.
If you don't want to put in this much effort, you can choose a strategy and create a system that only trades one time per month or even one time per every 6 months, it's up to you.
Not everybody wants to become a great trader- they just want some nice returns in their account. But having a system in place helps minimize the basic mistakes that most traders make. Name, they get impatient with their trades and buy or sell too soon and too often. This can be hugely detrimental and cost you a LOT of money. A system helps keep you on track and ride past the impatience we all feel at one time or another.
Great Traders Follow Trading Systems
But some people do want to become great traders.
You won't become a great trader until you master the basic techniques. You need to have a robust system in place system which allows you to make money - and your system also needs to prevent some random bad event from destroying your account!
A trading strategy could make a ton of money over time, but until you have a system in place which makes it easy for you to execute profitable trades over and over again, you will not make money.
The tasks aren't hard to learn, and they are not hard to explain. The difficulty of these tasks is the day-to-day execution.
Doing something correctly one time can be extremely easy. Doing that same easy task correctly 10,000 times can be very hard. That's where a good system makes all the difference - a good system makes doing that simple task 10,000 times much easier.
Trend Following works. You can see this over and over again - trend trades have made money for decades. Still, new people try investing all the time - but only some of them are successful.
The difference between the winners and losers isn't some unique entry system, or a magic exit system, or some complex way to calculate if a market is in a trend or not in a trend. No, the difference in success or failure in investing is creating an easy to follow plan which allows you to do simple, repetitive tasks correctly, over and over again.
I recommend making a trader's checklist of your daily basic tasts to make sure you do them diligently and daily.
Even if you do that you'll still recognize just how difficult it is to do something simple every day when it doesn't seem important.
You'll have checked the amount of risk you are taking on every trade for a few dozen weeks, and it won't seem that important. And then something major will happen in the markets and markets will go nuts with massive price swings.
All of a sudden, you'll have trades go wildly in your favor - and other trades become losers very, very quickly.
If you didn't check your risk, and make sure you have the stops in, those trades would have destroyed your account. But of course, you followed the traders checklist, and that movement in the market put a ton of money in the account.
"Losers have Goals, Winners have systems"
So who said the magic phrase "Losers have Goals, Winners have systems"?
It's Douglas Adams, the guy who draws the cartoon Dilbert! The guy draws cartoons for a living, and he thinks systems are important for living.
Here is more of what he thinks about having a good system:
"What I've discovered is that the routine of preparing to exercise usually inspires me to go through with it even if I didn't start out in the mood. This particular day, my body wasn't going to cooperate. No problem. The system of attempting to exercise worked as planned. I didn't have a trace of guilt about driving home. I've used this system for my entire adult life. I see exercise as a lifestyle, not an objective.
If I had a goal instead of a system, I would have failed that day. And I would have felt like a loser. That can't be good for motivation. That failure might be enough to prevent me from going to the gym the next time I don't feel 100%, just to avoid the risk of another failure.
A week after graduating college, I took my first flight in an airplane. I got in a conversation with a businessman in the seat next to me. He was CEO of a company that made aircraft screws. He told me that his career system involved a continuous search for a better job. No matter how much he liked his current job, he always interviewed for better ones. I assume he failed to get most of the jobs he interviewed for, but over time his system worked, and he became a CEO. My own system at the time involved listening carefully to the advice of anyone who was successful. I adopted the CEO's system in my own career, moving to higher paying jobs about once per year until I started drawing Dilbert (while continuing my day job)."
Do you think he has a system for drawing Dilbert cartoons? He's been doing it for a few decades, so I'd imagine he has an excellent system in place for creating his work.
I highly recommend you go to his blog and read more. He's a very sharp guy and one who used systems to become extremely successful in his life.
About Author Michael Sankowski
Michael Sankowski lives in Oak Park, IL and when not playing the guitar, has been a professional trader for 20 years. He's traded billions of dollars on four continents and is a well-known financial writer. He's a CFA, CAIA, and is a top ranking author on Seeking Alpha. Read more of his work at http://www.etfmomentumtrader.com
About Chia-Li Chien
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