Rules and Systems

A few months ago, I wrote a post titled How project management made me a better trader/investor where i talk about my experience and skills learned from years as a project manager and how they’ve helped in my trading and investing.

In the world of trading and investing, you learn by failure and you learn by success.  There’s so much to know and comprehend as a trader and investor.  To succeed, you’ve got to be prepared for failure and you’ve got to focus.

In addition…you’ve got to be prepared to follow the ‘rules’.

There aren’t any rules set in stone. To really be successful, you have to make your own rules. You’ve got to find a system or approach that works for you, your investing / trading time frame and your financial situation.

For example – if you want to live off your trading earnings monthly, you may not want to undertake a long term trend following method.  Or – if you only have 15 minutes per day to give to the market, you’d be much better off taking a longer term investing approach and finding / building a system that works for you.

So – these ‘rules’ and your system / approach is important to your success.  Without them, you’ll not really have any serious plan for success as a trader / investor.

The same is true for the world of project managers, no?

Without a formal project management ‘method’, how can you really know where you are going, how you will get there and/or when you are done?  FYI – I don’t care if your using an ‘old’ waterfall method or a ‘new’ agile method for your projects…you have to have a method. You have to have a ‘system’ for accomplishing your project goals.

This system is full of rules. These rules are set in place for a reason…they help direct the project managers, project team and stakeholders to understand what’s happening, why its happening and where the project is going.

Without these rules you’re pretty much hosed. The project will be off track and you can bet you’ll break one of the time, budget or scope areas within the project.  These rules are in place to guide a project manager and team.

Regardless of whether the PM or project team agrees with the rules or the approach, they’re there for a reason. The PM may have an opinion that the plan isn’t correct, but she better not deviate from that plan without first going back to the stakeholders and getting approval to change the plan.

Same goes for the project team…they may have their opinions on how things should be done, but they better not deviate from the agreed upon approach without first circling back to the PM to make sure their new approach doesn’t affect some other team member’s approach or affect the overall project plan.

The same is true in the trading and investing world. As a trader, you have a plan, a system and your rules…and you need to follow them. You may have an opinion about the market, but unless that opinion is worked into your plan with the proper rules for managing risk and entry/exit, you might just get ripped to shreds in the market.

Two of my favorite traders – Ron Roll (on twitter as gtotoy) and Peter Brandt (on twitter as PeterLBrandt) – shared some excellent insight recently about their approach to trading.

Ron shared the following insight on twitter:

[blackbirdpie url=”https://twitter.com/#!/gtotoy/status/103192868109299712″]

On a similar note,  in a post titled When does a victory feels like defeat?, Peter writes:

…an opinion is not a position and a position is not an opinion…This is a tough lesson for novice traders to learn. But it is a lesson that must be learned.

There’s a difference between an opinion and an investment / trade. Without applying your system and rules to that opinion, you shouldn’t make a trade. Same is true for projects…without running your opinion through the approach system, you can’t really tell what risk that opinion might introduce into the project.

In the same article, Peter writes:

Do I periodically override my rules? Yes. Do I usually regret overriding rules. Yes again. My trading rules are based on what I know about market behavior, not on how I feel at any given moment….

Battling the emotional pull to override trading rules is the toughest part of my job. There is not even a close second.

Emphasis mine.

It’d be very easy to change this to focus on projects…a project’s plan and stakeholder agreement (i.e., the rules) are based on years of experience and expertise, not on one person’s opinion. One of the toughest things a project manager (and trader) can do is keep their opinions in check and ensure their systems are followed.

Your system (e.g., project plans, procedures and processes, etc) are there for a reason…start working outside that system and you’ll have hell to pay with project failures, cost over-runs and/or scope creep (or…as a trader…monetary losses out the wazzoo).

Now…unlike the photo I used at the start of this post, your opinion does, in fact, matter. Just make sure you run that opinion through your system and processes to ensure that its in line with reality.

As a project manager or trader/investor – your system and rules are your life…follow ’em or fail.

Image Credit: opinion By the|G|™ on flickr