The “Trading School of Hard Knocks”

In my article “How many spread betting accounts do you need?” I referred to something called The Trading School of Hard Knocks. It’s not a real school, of course, but is what I affectionately call the recipient of the trading losses that I made while learning the ropes (and which I sometimes still do).

Every failed trade is a learning opportunity, and like all learning opportunities… it costs money. Attending a trading course costs you money, and attending university (but I don’t think they run trading courses) costs you money these days. A lot of it.

What do you get for the typical £9000-a-year university fees? A lot of debt plus three, four, or maybe more (if you want to be a doctor) years taken from your “working” life. But don’t worry, because they tell us that a graduate will typically earn £100,000 more over their lifetime than a non-graduate. Maybe this was true when a small proportion of the population, including me, went to university; but now that almost everyone is encouraged to do so, who is there left to earn £100,000 more than? Maybe your co-worker in the burger bar… which is where you might end up even with your degree. Except that he rose through the ranks to become your McManager while you were in the student bar.

Let’s do a thought experiment:

Suppose you stayed home and allowed yourself a £9000 trading balance. At the end of the first year you might end up £9000 down, but you may well have learned some life lessons that ultimately prove more valuable than those provided by your first class honours degree in “David Beckham Studies” (from Staffordshire University, apparently). At the end of three years you may well have cracked the system, and ten-bagged the total £27,000 that you committed to the project into £270,000. You might get lucky sooner, in which case you’ll be able to earn while you learn.

This is only a thought experiment, so don’t rush out and do it!

My point is that many ultimately successful traders regard their early losses while they were “learning the ropes” as equivalent to their course fees at what might be called the university of life. Or what I call “The Trading School of Hard Knocks”.

But this is a school or university with a difference: one that offers 100% work experience on the basis that people can learn for themselves what they are really interested in whereas they can’t be taught what they are not interested in. Compared with the typical university course fees, even those overpriced “professional” trading courses might appear to be good value, but they’re no substitute for learning from your own mistakes.

So as not to appear irresponsible by suggesting that you eschew formal education in favour of trading, I have a better idea. With 24-hour market access, with trading orders than you can place out-of-hours, and with the prevalence of WiFi and 3G connections, maybe you can attend two universities at once by trading from your dorm room. After all, it’s only money that you would otherwise fritter away in the student bar!

Tony Loton is a private trader, and author of the book “Position Trading” (Second Edition) published by LOTONtech.