Several years ago, I attended a luncheon meeting at the Economics Club of Chicago in which Bill Gates spoke.I had never heard Gates speak in person and I was ready to hear all about the newest software and latest technology. Much to my surprise, and disappointment, all Gates talked about was what he called "data mining".
Gates thought data mining was important.
He said that by analyzing data collected throughout your business, you could find revealing insights leading to improvement.
To tell the truth, I did not get it.
For me, the meeting was a bust. I came to hear something useful and exciting and all I got was a discussion of data mining. My reaction to Bill Gates was similar to the time some years ago when a wealthy, older family friend in Iowa told me he wanted to talk privately with me after dinner.
He said he wanted to tell me something important.
After dinner, he and I went downstairs away from the rest of the family to play Gin Rummy (this is Iowa, not New York City) and, for me, to hear what he had to say. He cleared his throat, looked at me seriously, and told me that he thought the stock market was poised for a rally.
Poised for a rally?
Was he kidding? No one wanted to buy stocks, least of all me. Stocks hadn't done anything for years.
The stock market was actually lower, at that time, than it was ten years before when I first became a stockbroker. I was disappointed. I thought that he was going to tell me something important.
Did I mention that our long-ago Gin Rummy game took place in early-August 1982, just days before the Dow bottomed at 777 and began an eighteen year bull run to over 11,000?
Just like hearing about data mining from Bill Gates, I did not get it.
However, today I saw a dramatic example of how mining the data from your trading can lead you to important discoveries.
This may not be exactly what Bill Gates had in mind, but it demonstrates the importance of keeping detailed, accurate records of your trading and periodically analyzing your records.
One of the traders in the Electronic Trader Mentoring Program took my advice and analyzed his trading in 2008 during the dreaded two weeks off from trading in late-December.
As you might expect, he tallied his trades by month. He listed them by setup and he figured his winning percentages and losing percentages.
Lastly, he separated trades that matched his plan from trades that were impulsive and did not fit into his plan. The impulsive trades were obviously the result of a temporary lack of discipline and nearly all of them were losers.
In this case, the lesson from looking at his past trades could not have been clearer. Had he not done these emotional, out-of-plan trades, he would have more than doubled his result for the year. Instead of making a 15% return on equity in his trading account, he would have made almost 40% return in 2008. Maybe, this was what Bill Gates was trying to tell us.
My suggestion is that you make a New Year's resolution to analyze the data from your trading in 2008. There could be some easily-implemented change that you can make to advance your trading in 2009 without taking more risk - in this trader's case actually by taking less risk.
If you would like my help in finding and documenting a methodology that works for you and then exploiting that methodology in my Electronic Trader Mentoring Program, please contact me at Jeff@ElectronicFuturesTrader.com.
As your trading coach, you can let my hindsight be your foresight.
Wishing you success in your trading, Jeff
Copyright © 2009 by Jeff Quinto
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