Many of the efforts we make in life are compensated proportionally based on how much of our time they required.
If you want to learn how to be good in a sport, the more time and effort you dedicate to it, the more likely you are to become good at it.
The same is true for many careers. For example, if you are a doctor, the more people you see at your clinic, the more money you’ll make.
Usually, the outcome of most human activity is proportional to time and effort. Therefore, we come to believe that this is some kind of natural law, like the force of gravity, and if we notice that we are not achieving good results in doing something, we might believe that our poor performance must be caused by a lack of effort or motivation.
The perception is that we will be compensated for our fatigue and labor. This is reinforced in our daily lives. For example, if someone works more, he thinks that he deserves more money than his colleague who worked less but achieved more because it feels morally right and just.
Unfortunately, sometimes the outcomes of our jobs are totally dependent on the days spent doing it. It is not because life is unfair, it’s just how it is.
The easier example is the life of an entrepreneur who had a single good idea in his life and is still making money out of it after years have passed.
I am not saying that it is thanks to luck that we become successful without spending every single hour of the day working. Luck is an important component, but what really makes the difference between an entrepreneur and a doctor is that the job of the first one is non-dependent by its nature on the time dedicated to doing it.
A singer might spend one hour or one year on writing a song, but their success is completely dependent on how many people like the resulting song.
You really don’t listen to a song because an artist spent so much time making his masterpiece that you feel like you want to make him happy by buying his album.
In investments, this is even more true. Once you have studied enough, unless you are involved in a highly quantitative finance area, you’ll make money because you made the right decision in the right moment and bought a stock after it went down. You gain because you were the only one who did not overreact during the bad news or because you sold a stock at the top instead of following the crowd and buying more.
In finance, making a bad decision or a good one takes the same amount of time. Making money is a matter of skills, intelligence and emotional control—but time is not involved.
Financial markets do not obey the moral law that wants our every hour of effort to be compensated.
One of the things that many people outside the industry think is that good traders must be spending 12 hours in front of the screen. This is clearly not true. There are indeed investors who have checked their accounts two times a year and still made more money than many others.
To be precise, even in the trading world, some strategies require more time than others, but this does not make them better or worse. Being time-consuming is a characteristic of many trading styles, like futures scalping.
The number of hours that a trader spends in his office has no relationship to the money he would make.
Would you be happier as an asset manager if you made a 10% return because of your natural skills and spent most of your time playing golf or if you spent12 hours in the office getting a 5% return?
When people start trading options, for example, they ask me how it is possible that just a few hours a week are enough. In fact, they think that it cannot be as remunerative as futures scalping because it sounds too good to be true.
Making money trading options is still not easy—even if the time required is probably 10 times less than most other trading styles.
In the case of algo trading, one can think that because machines do the job, the trader can make money passively. This is really not true. Whatever is his style, an algo trader spends many hours implementing and testing his strategies, or checking the execution and internet connection, but all of these activities are less stressful than the actual daily routine of a more classic trading style.
At this point of the article, dear reader, you might think that I want to convert the rest of the world to join m and trade options or being an algo trader. However, not being a good seller, I don’t want to convince you about anything. I even think that if you are already a good forex scalper, you should stick to that, because stopping a profitable activity to do something else can be very risky.
If I was good at futures scalping and I could have the same performance by investing in stocks, dedicating just one hour a week to it, I would of course go for the second choice because our time on this planet a limited resource.
At the same time, if someone is not good at implementing trading systems or trading options, just because of personal attitude, he should probably try something else. In fact, there are people who genuinely enjoy placing orders and trade actively because they are naturally born with this attitude that very few people have. In this case, the time required by this activity might not be wasted but well spent.
If you made it to the end of this article and if you are already a seasoned trader, you already knew everything I have just covered. You learned it the hard way. Sorry to have wasted your time.
If you are a beginner, do not fall into the trap of thinking that some magical force will remunerate your time spent in front of your laptop analyzing charts, because no one really cares. However, if you fancy options or algos, you are lucky, because you might have more free time to spend on other pleasant activities.