SKICOD, from Paolo Pezzutti

March 22, 2007 |

 This acronym stands for Skill, Commitment, and Discipline.

I like to refer to SKICOD when analyzing my approach to markets and assessing whether I will ever succeed as an investor and a trader.

The first element is skill. Proper and detailed knowledge of the market structure and the related products is a fundamental requirement. Having an edge is also the basis. If you buy and hold for 25 years, as it was proposed recently on the SPEC list, you do not need an edge. But if you want to be active on the markets, not having an edge will bring you sooner or later to a loss (it depends on how lucky you are if it is later than sooner). An edge you have today may also disappear. A market inefficiency you identify in now could fade away with time, reducing margins. Continuous research is therefore necessary to keep you competitive in the markets.

The second requirement is commitment. Passion (and obsession) for trading is necessary if you want to obtain above average results. Only with sacrifice and determination you can get the knowledge, the experience, and the hunger for results that is typical only of ultra motivated and committed people. Time is an important component of commitment. Unfortunately, time is a scarce resource. As a part-time trader, I suffer from the lack of time. Family and work may absorb an enormous quantity of energy from you. And if you want to be healthy also some hobbies and cultural activities are necessary. The rest has to be dedicated to trading with great sacrifice.

Discipline is the last but not least requirement. This is probably the most difficult part. Building proper procedures and implementing them consistently is a complex challenge. One must also consider the psychological and behavioral aspects of trading. Being able too build a map of your decision making processes, defining your trading "decision tree," and sticking to it are the keys for success.

I am still struggling to improve myself from a technical and mental perspective in a continuous iterative process, that eventually would lead me to make my meal for a life time, be a better trader, and a better man.

Alan Millhone adds:

I enjoyed your fine article. Your three areas have a direct carry over to my game of checkers.

Number one is skill. In the scientific study of checkers skill is important and has to be developed with study of the game and over the board play with better players. In the market one must associate with the top traders who have paid their dues and have learned a great deal about the market over years of trading.

Number two is commitment and in checkers you have to devote yourself to study the books on the game and do so on a regular basis in order to understand and improve one's game. Rome was not built in a day and neither will one improve in checkers overnight. I am not a trader, but have learned much from this list of experts and seasoned traders. Your article and many others carry over to the board and thus have helped my game improve. The main thing in checkers and the market is keeping your mind open and to think outside of the box.

Number three is discipline, and in a game you have to set a course to follow once the opening moves of a game have been played. When you arrive at a critical juncture and decide to do something else, you usually encounter trouble. Discipline to 'stay the course' in the market is just as important and many times you do your own research and chart your own course to pursue.

I enjoyed your article.





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