What Being a Rock Singer Taught Me About Trading
I’ve sung in rock bands since I was 15. There is nothing that compares to the experience of standing on stage being cheered by a thunderous crowd after having performed with your buddies.
But as AC/DC so eloquently put it, “It’s a long way to the top if you wanna rock ‘n’ roll.”
As any musician will tell you, being in a band comes with a lot of ups and downs.
It’s not all that different from trading.
Like playing rock ‘n’ roll, trading looks glamorous, but there’s a lot of hard work that goes into being good and there are plenty of difficulties along the way.
Here are a few life lessons I learned playing music that I apply to my trading…
No. 1: Check Your Ego at the Door
Musicians have either giant egos or fragile ones. Sometimes both.
Years ago, I played with a drummer who had the latter. Toward the end of a show, the lead guitar player said something to the drummer about his timing. I didn’t overhear what was said. I was busy singing, but I noticed the drums had stopped. I turned around to see what was going on and saw a knock-down, drag-out brawl on the stage.
What did the guitar player say? “Pick it up. You’re dragging.”
Not exactly inflammatory stuff, but the drummer took it so personally that it not only ruined the show but also ruined the dynamic of the band going forward.
Similarly, when I was on the trading desk, I had a boss who would throw chairs when certain trades went against him.
No one likes to lose money, but if this guy was down $20,000 on a trade, it was going to have zero effect on his lifestyle. He could easily afford it. Yet he could not handle being wrong.
And just like my former drummer who’s out of the band, my former boss is out of the trading business now.
If you’re an active trader, you’re going to be wrong – a lot. You can’t let your emotions get the best of you. The very best traders are almost robotic in their ability to take a loss. Once they realize the trade has gone bad, they’re out. No rationalizing, no getting upset. They know the next winner is around the corner. They take their loss and move on.
No. 2: Cut Your Losses and Let Your Winners Run
I don’t know why, but a lot of musicians are nuts. I don’t have time for nuts.
With every band I’ve been in, if a person is too crazy or is a drama king or queen, we’ve let them go. And if they’re unwilling or unable to do their part in the band, we show them the door. No reason to spend all the time necessary to put a good show together only to have someone be unreliable or unable to do their part. Cut them loose and find someone new.
In trading, there is no reason to hang on to a loser, hoping it will bounce back. It’s like hoping the drummer with terrible timing was suddenly going to improve. It’s not going to happen for him, and it won’t for your trade.
As I said above, not all trades work out. Cut the ones that don’t quickly. Doing that will have a more profound impact on your portfolio than your winners.
Speaking of winners, they tend to move more than you think they will. Use a trailing stop to get out of a trade if it reverses, but don’t sell just because you’ve made a certain amount of money.
Most winning traders have a few big trades during the year that make all of the difference in their results. Don’t cut yours short by getting out too quickly.
No. 3: It Takes Work
In high school, I played in a band with the top guitar player in school. The kid was legendary where I grew up. He went on to be nominated for a Grammy, and playing guitar is the only thing he’s ever done for a living.
Many years ago, I went to see him play at a small bar. There was no one there. He had just gotten off the road, where he’d played arenas. I said to him, “Last week you were playing at the PNC Center, and tonight you’re playing for me and our eight friends.” He replied, “I’d be practicing at home tonight anyway… I may as well play for my friends.”
When we see musicians put on a great show, it looks easy. What you don’t see is the hours and hours of practice that it takes to make it look effortless.
Same thing with trading. Every great trader had a big learning curve. I’ve never met one who started making money right off the bat.
To be a good trader, you need to trade and learn from your mistakes. You have to put the work in, understand why you made your trades, and understand why they likely did or did not work out. Whether you’re learning about technical analysis, trading systems or trading platforms, always look for ways to improve your knowledge about trading. You’ll enjoy it more, and your results will improve.
A big winning trade comes with the same exhilaration of a successful concert. Make sure you’re doing what it takes to set yourself up for the greatest chances of success.