How does the 80/20 rule (i.e. the Pareto principle) apply to trading? What is one of the best ways for traders to learn from their mistakes? How long does it take to become a successful trader? These are just a few of the questions we dissect with Rob Booker in this episode of the How To Trade It podcast. If you’re constantly looking for ways to become better at the art of trading, don’t miss this episode!How can you apply the 80/20 rule to trading? @RobBooker shares his thoughts in this episode of How To Trade It! #stocks #stock #trading #trader #Forex #StockMarket #Investing #DayTrading #StockPicks Click To Tweet
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You’ll want to hear this episode if you are interested in...
- [1:25] A discussion of the Pareto Principle
- [12:22] Why journaling losses makes an impact
- [21:48] How long does it take to become successful?
- [32:03] How to learn more from Rob Booker
From Forex to stock trading
Rob Booker traded Forex exclusively for his first 13 years of trading. He went through many different strategies culminating in robotic strategies that run automatically. They still function fine but when volatility spiked, 20% of his trading was done in Forex. Now it’s completely gone. He hasn’t made a single Forex trade in 14 months. For the types of strategies he likes to trade, this market has been good for trading stocks.
Rob made a huge $22,000 loss last year on Wayfair because he was being stubborn. Ironically, I must’ve gotten in around the same time and had an amazing run. Rob jokes that the stock market is a zero-sum game and that someone had to rake in what he lost. If he had to lose the money, at least it went to me!
A discussion of the Pareto Principle
In the book 80/20 Sales and Marketing, Perry Marshall talks about the Pareto Principle (80% of consequences come from 20% of causes). I’ve seen it demonstrated everywhere in my life ever since. You have to quit doing the stuff that isn’t working and start doing more of the stuff that does work. If you continue to do that in every area of your life, you’ll see exponential growth everywhere.
Rob read The 80/20 Principle by Richard Koch in the 90s and remembers the premise being that a small number of things that you do are responsible for a large percentage of the results that you get (that are positive). He’s also found it to be true that a small mistake can be responsible for the majority of losses. There are very few things that really matter and many people spend their time on busy work.
Rob had some losing trades the morning of this recording. He lost track of some things and accidentally traded 40,000 shares instead of 4,000. What would have been a $380 loss was a $3,800 loss (which isn’t quite catastrophic for Rob, luckily). That’s something that he would normally never do. If he hadn’t closed it, it would have ended closer to $11,000 in losses. He stayed within his loss parameter but that mistake could have been avoided.In this episode of How To Trade It, @RobBooker and I discuss the Pareto Principle and how it applies to trading. Don’t miss it! #stocks #stock #trading #trader #Forex #StockMarket #Investing #DayTrading #StockPicks Click To Tweet
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Why journaling losses makes an impact
Rob recently recorded some videos with Tim Sykes and in the process met some of the people that trade with him. One of these people said his losses had improved significantly because he journaled. He charted the date, the amount of the loss, how it happened, and what he would do going forward. It was a real eye-opener. He learned a lot from his losses. You have to feel the pain and change moving forward.
Rob hadn’t been a fan of trade journaling, but a significant turn for the better is hard to ignore. 100% of the traders Rob has met that were unsuccessful cycled through doing really well and really badly. They never recover from their biggest loss. When Rob closed his Wayfair trade, he gave back ⅓ of all of his gains for the year. It was a giant step back. If he took two more, he’d be at zero.
Journaling can help you see patterns. Once you know exactly what will make the most amount of difference, it can be exciting. It’s just one thing you have to do differently. What was the ONE thing that Rob nailed down that was throwing his trading? Listen to find out!
It takes seven years to be successful
How many years does it take to become a successful trader? According to Rob, it’s seven years. He got this idea from an annual letter Jeff Bezos sent to shareholders when the Amazon phone failed. He said that they give themselves seven years for a product to fail and cost them money which gives them an infinitely longer timeline than any competitor. In doing this, they will outlast the competition. They built a business where they won’t answer to shareholders with a short-term point of view.
When you make the mental choice to give yourself seven years, you realize you have time. If you don’t give yourself enough time, you dive in headfirst and blow up your accounts. But if you give yourself seven years, you could be profitable in a matter of months. Why? Because you aren’t rushing the process. You’re not forcing it. You can take time off. It doesn’t really take seven years, but it does take the mentality.
So what dollar amount equals success as a trader? Does your attitude matter? Rob shares his thoughts—keep listening.According ro @RobBooker, it takes seven years to become a successful trader? Why does it take so long? Listen to this episode of How To Trade It to hear his thoughts! #stocks #stock #trading #trader #Forex #StockMarket #Investing #DayTrading… Click To Tweet
Resources & People Mentioned
Connect with Rob Booker
Connect With Casey Stubbs
- Website: https://caseystubbs.com
- YouTube: https://www.youtube.com/TradingStrategyGuides
- YouTube: https://www.youtube.com/caseystubbs
- Twitter: https://www.twitter.com/caseystubbs
- Facebook: https://www.facebook.com/TradingStrategyGuides
- LinkedIn: https://linkedin.com/in/caseystubbs
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Disclaimer: Trading carries a high level of risk, and may not be suitable for all investors. Before deciding to invest you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment. Therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.