Tip# 91

Expertise
Part Two
by D. R. Barton, Jr.

Information's pretty thin stuff unless mixed with experience.
--Clarence Day, The Crow's Nest

In last week's tip, we discussed the importance of developing expertise as an essential part of the trading well over the long term. The expertise that I mean here is the kind learned by "time at task." This could be an expertise in the application of a certain class of technical indicators, of a price movement discipline like Market Profile or in classical "tape reading".

Two questions spring to mind. The first is this: "Can I succeed with just a good understanding of one or more of these areas?" This question is never even considered in any other field of endeavor, either professional or recreational. No one would consider trying to become a doctor, lawyer, engineer or accountant in a month or two. And while you can develop enough skill in a few months to enjoy participating in golf or tennis or playing the guitar or piano, you will by no means be proficient at any of them when just starting out. You don't need to be the Tiger Woods or Mark Knopfler of trading to be successful. But if you want to play golf well, you have to hit buckets of balls on the practice range. If you want to play the guitar beautifully, you have to strum some chords when no one is listening. And if you want to trade well, you need to develop a level of expertise in your chosen market and trading style.

Now for the second question: "Does this mean that a beginner has no chance in the markets?" The answer is both "yes" and "no". The average undercapitalized beginner with no expertise has about a three percent to 20 percent chance of making long-term money in the markets, depending on which studies you believe. BUT, a new trader who is properly capitalized and follows some simple rules including finding or developing a positive expectancy system, controlling risk exposure and managing their trading psychology can put themselves on the path where they manage their initial "marketplace tuition" (also known as draw downs) and move toward trading success.