Do You Really Want to Trade?
The eight weaknesses that stop traders, and the question of motive that has to be settled before any of them matter.
Do you really want to trade?
The misguided expectations of traders and investors.
Traders greatest weaknesses
- Execution (pulling the trigger)
- Analysis
- Lack of knowledge
- Lack of confidence
- No trading plan (system)
- Personal problems
- Fear of loss
- Not devoting enough time
As Calvin Coolidge wrote: "Press on. Nothing can take the place of persistence. Talent will not; the world is full of unsuccessful people with talent. Genius will not; unrewarded genius is almost a proverb. Education alone will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent."
There is a hand full of keys to success in life. The ability to view one's own behaviour is one of them. This is one of the qualities that separates us from the animals. The ability to know and understand human nature and stand above it is to mankind unique.
When things are going well for our clients it is funny the way our phone stops ringing with customer service calls. Over 30 years of experience has taught this analyst to view this quite calm as the sound of "profits running." It is only when perceived missed opportunities occur or a few losing trades hit or a flat trading period happen that our inbox fills up with request for assistance.
“Too many traders think in terms of absolutes when they approach the markets, when in effect it is a matter of relativity.” Jack F. Cahn, CMT and Contrary Thinker.
Here is the KEY: some developer/traders believe that systems, strategies and indicators have some kind of external life where the statistics the system generates are more meaningful then the trader’s ability to understand and trade the strategy.
I’ll put it another way to be clear, if you are a trained quantum physicist and you approach the business of trading futures, you will need to understand the methods used in the terms of the science you understand. This does not mean that the scientist has found some new ultimate way of beating the market. It means he has developed a method to beat the markets that he understands.
"Anyone with an average intelligence can learn how to trade. This is not rocket science. However, it’s much easier to learn what you should do in trading than do it.” Bill Eckhardt, of market wizard.
As Bill intimates you don’t have to be a rocket scientist to make it at the business of trading. I feel strongly that the sooner the developer/trader understand that it is all relative to his point of view, to his way of understanding, the better off his chances of beating the markets on a consistent basis.
That is what Contrary Thinker is all about. It is not about egos posting ideas just to get recognised.
First, be sure that you really want to trade. As both Krausz and Faulkner confirmed, based on their experience in working with traders, it is common for people who think they want to trade to discover that they really don't.
Think about why you really want to trade. If you want to trade for the excitement, you might be better off riding a roller coaster or taking up hang gliding. In my own case, I found that the underlying motive for trading was serenity or peace of mind - hardly the emotional state typical of trading. Another personal motive for trading was that I loved puzzle solving - and the markets provided the ultimate puzzle. However, while I enjoyed the cerebral aspects of market analysis, I didn't particularly like the visceral characteristics of trading itself. The contrast between my motives and the activity resulted in very obvious conflicts. You need to examine your own motives very carefully for any such conflicts. The market is a stern master. You need to do almost everything right to win. If parts of you are pulling in opposite directions, the game is lost before you start.
How did I resolve my own conflict? I decided to focus completely on mechanical trading approaches in order to eliminate the emotionality in trading. Equally important, focusing on the design of mechanical systems directed my energies to the part of trading I did enjoy - the puzzle-solving aspects. Although I had devoted some energy to mechanical systems for these reasons for a number of years, I eventually came to the realization that I wanted to move in this direction exclusively. {This is not intended as an advocacy for mechanical systems over human-decision-orientated approaches}. I am only providing a personal example. The appropriate answer for another trader could well be very different.
Where this breaks down
- [Draft , Jack to add failure modes and conditions under which this framework breaks down]
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