The Smartest People in the Room...
In the trading world we are often mesmerized by people who have done extraordinarily well in the financial markets over time. We think of them as pure geniuses who rarely make a mistake. If you read the Book: Market Wizards" by Jack Schwagger you will quickly see that these guys also had their bad periods and were in tenuous situations more than once. They weathered these market situations which is why they became legends.
There is so much financial jargon on the net. It is virtually everywhere with one opinion after another on where and why the markets are headed in a certain direction.
What you will find over time is that even the smartest fellows in the room make a lot of mistakes. This is normal in a dynamically moving entity, which is what the market is. Chaotic is a better word. Much like the universe that we think is a relatively quiet place until we look at it up close with Asteroids flying everywhere, Stars exploding in far off galaxies and a host of other actions that we can only begin to guess. In a sense that is the markets. Rarely predictable and almost always chaotic. They are this way because they reflect the things that make them what they are. People.
People are rarely ever rational. Especially with money on the line. You might think that the big bank and fund traders are good traders and this too would be a mistake as statistics prove that they are not with most of the big funds underperforming the index averages over time. This is the fallacy behind most retail traders lack of success. They don't really get how hard it really is to perform at a very high level over a long period of time. For most it is a daunting task that quite simply will never happen.
The markets are made of orders. Positions in the markets both long and short. One wins out and this is why the markets move or trend eventually. You know that they only trend 20% of the time and this is why. A back and forth tug of war until one entity (bulls or bears) win out. This is also the reason why volume profile is not a perfect mechanism and why hard stops are not really designed for the markets.
The best advice I can give a new trader is to learn to be the person you trust. I am not telling you that you should shoot for being the smartest person in the room because in the markets I don't think that this exists. Hone your skills as a market analyst so that you trust your trades you take and that you realize that you took them for a very good reason even if you find yourself in a drawdown. Humility is a good teacher. It quickly tells you that you were wrong. That you need to rethink your strategy. Patience is the other virtue. Trade only when the market is telling you that it wants you to trade. For example the bull market in stocks. Instead of trying to predict why and when it will end focus more on riding the trend in place. It is that way for a reason and until it isn't a trend any more it is still a bull trend. Keep this in mind next time you start believing that someone else knows more than you regardless of who they are. Cheers.
There is so much financial jargon on the net. It is virtually everywhere with one opinion after another on where and why the markets are headed in a certain direction.
What you will find over time is that even the smartest fellows in the room make a lot of mistakes. This is normal in a dynamically moving entity, which is what the market is. Chaotic is a better word. Much like the universe that we think is a relatively quiet place until we look at it up close with Asteroids flying everywhere, Stars exploding in far off galaxies and a host of other actions that we can only begin to guess. In a sense that is the markets. Rarely predictable and almost always chaotic. They are this way because they reflect the things that make them what they are. People.
People are rarely ever rational. Especially with money on the line. You might think that the big bank and fund traders are good traders and this too would be a mistake as statistics prove that they are not with most of the big funds underperforming the index averages over time. This is the fallacy behind most retail traders lack of success. They don't really get how hard it really is to perform at a very high level over a long period of time. For most it is a daunting task that quite simply will never happen.
The markets are made of orders. Positions in the markets both long and short. One wins out and this is why the markets move or trend eventually. You know that they only trend 20% of the time and this is why. A back and forth tug of war until one entity (bulls or bears) win out. This is also the reason why volume profile is not a perfect mechanism and why hard stops are not really designed for the markets.
The best advice I can give a new trader is to learn to be the person you trust. I am not telling you that you should shoot for being the smartest person in the room because in the markets I don't think that this exists. Hone your skills as a market analyst so that you trust your trades you take and that you realize that you took them for a very good reason even if you find yourself in a drawdown. Humility is a good teacher. It quickly tells you that you were wrong. That you need to rethink your strategy. Patience is the other virtue. Trade only when the market is telling you that it wants you to trade. For example the bull market in stocks. Instead of trying to predict why and when it will end focus more on riding the trend in place. It is that way for a reason and until it isn't a trend any more it is still a bull trend. Keep this in mind next time you start believing that someone else knows more than you regardless of who they are. Cheers.
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