When Modeling Great Traders Goes Too Far

modeling great traders

modeling great tradersSeth Godin published a post last week that he called Origin Stories. In that post, he discussed the humble and interesting beginning of a variety of successful people and groups like The Grateful Dead, Superman, and Hewlett Packard.

He then explained that despite the fact that these stories are all very interesting. They are just stories. They aren’t something that we can replicate or model. His words say it best:

You can’t reverse engineer success by researching origin stories. You can’t follow the same path as those you admire and expect you’ll end up in the same place.

This idea applies tenfold to traders.

I’ve made a point on this site to place a pretty strong emphasis on modeling great traders like the Market Wizards. However, we must be careful to model their actual trading instead of trying to replicate their origin stories.

Just because a trader became successful after going to a particular school or working at a particular investment bank does not mean that you will be successful following the same path.

Many times we catch ourselves focusing on the wrong things when we attempt to follow our trading mentors. It is easy to get caught up in a great story.

Some of my favorites are Jesse Livermore trading in the bucket shops, Bill O’Neil starting out with only $5,000, and Richard Dennis searching for his group of Turtle Traders.

When studying the great traders, we need to make sure we are spending our time understanding their processes. We almost certainly aren’t going to have the same stories as the traders we study, but if we focus on what behaviors truly made them successful, we might have a chance to write our own stories.