Imagine two friends taking a college course. Both have similar abilities and backgrounds, but one takes a test each week, while the other waits for a final. All other factors being equal, which of them is likely to get a higher grade on the exam? The one who waited or the one who took weekly tests?
Most educational systems test students at regular intervals. Testing prompts people to fill the gaps in their knowledge. Students who take tests throughout the year tend to do better on their finals. Frequent tests help improve performance.
Markets keep testing us, only most traders don’t bother to look up their grades. They gloat over profits or trash confirmation slips for losing trades. Neither bragging nor beating yourself makes you a better trader.
The market grades every trade and posts results on a wall, only most traders have no clue where to look. Some count money, but that’s a very crude measure, which does not compare performance in different markets at different prices. You may take more money from a sloppy trade in a big expensive market than from an elegant entry and exit in a difficult narrow market. Which of them reveals a higher level of skill? Money is important but it doesn’t always provide the best measure of success.
Alexander Elder - Come Into My Trading Room
