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Anyone who has studied a martial art such as karate, judo, or kung-fu would be familiar with a system of grades or “belts” that must be achieved and earned along the path to mastery.
Students begin with a white belt and as they grow in skill and experience, they gradually rise in rank through the different coloured belts such as yellow or green or purple, with the prestigious “black belt” as their final target.
I wish someone had told me when I was starting out in trading that I was effectively trading with a “white belt”. I had no trading knowledge, no trading skills and no trading experience – so why should I have had expectations of defeating “black belts”?
Karate lessons begin with basic training. You need to learn how to move, how to block, how to punch and how to kick. However, there is a big difference between learning a punch in theory and then landing that punch on a seasoned black belt fighter.
It takes a lot of time to practice the technique before you can even apply it in a training environment. Once you felt you had mastered a defensive technique, such as an “upward block”, you wouldn’t jump straight into fighting a skilled black belt. You would practice against other students at a similar rank to you.
In karate, this is known as sparring – a practice fight under controlled conditions, where techniques can be mastered without the risk of severe damage to either student.
In trading, we call this “paper trading.” It is the warm up, or rehearsal before the big event – live trading.
With time and practice your skill level will increase and you can progress to the next level – not a black belt, but merely one step higher.
Even black belt students practice their basic training over and over again – all karate is built on the foundations laid down in the basic training. Similarly, all trading techniques are built on the basic foundations of trading – a trading plan, money management and trading psychology.
Every skill learnt in trading needs to be practiced repeatedly. Just like karate, when we learn a new technique, we need to practice that technique over and over again, until we can apply it perfectly, every time. Only then should we include it in our trading arsenal.
In karate, a white belt may throw a lucky punch or lucky kick and knock down a seasoned black belt fighter. But 99 times out of 100, the black belt will win the fight and win it easily.
In trading, a new trader can experience a large win, maybe 10 or 20 or 50 times the usual amount. However, this is like the white belt knocking out the black belt – it is the exception to the rule, not the norm. One good trade does not make you a “super trader.”
Where are you at with your trading? Be honest with yourself.
I believe for the first 6 months of trading all new traders should wear a “white belt”. Be aware that you are new and you must earn the rank of each of the coloured belts along the way.
There is no instant way to go from a white belt to a black belt, in karate or trading. You can speed up the process by putting in the hard yards and lots of practice, but you still need to experience each technique in a live “sparring” or paper trading environment before you can claim to have mastered it. This can only be done over a number of years.
In most martial arts there are 10 progressions from white belt to black belt. For example, white belt, yellow belt, green belt, purple belt, brown belt… It generally takes around 6 months to move from one belt to the next, depending on the individual student’s progress, which means you are looking at around 5 years of training in order to achieve your black belt.
Both WD Gann and David Bowden said that trading is about a 5 year apprenticeship.
You wouldn’t expect to read a book on medicine and then go out and perform open heart surgery. You wouldn’t read a book on law, and then defend yourself in a court case. You certainly wouldn’t read a book on karate and then challenge Bruce Lee or Chuck Norris to a fight!
The same goes with trading. Don’t expect black belt results if you are only on your white belt. Formulate a plan, put in the hard yards and accept that it will take some time to achieve your goals.
And finally remember that in karate, achieving your black belt is only the beginning. There are then 10 levels of black belt to work through - and it takes a lifetime to achieve mastery. WD Gann was still researching and growing as a trader when he was over 70 years old, after 50 years in the market.
Be Prepared!
Mathew Barnes
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