Heads Up!

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"Thinking is easy, acting is difficult and to put ones own thoughts into action is the most difficult thing in the world."

Wolfgang Von Goethe 

If you´re wondering why I´m quoting Goethe rather than some tired old trading cliché people normally quote, it´s because it sums up a key issue in trading, i. e. it´s much easier to be a thinker/analyst than a doer/trader and have to deal with the consequences, risk and uncertainty of your actions.

Action and Performance are what matter most in trading.

For example you can believe you know everything about what it takes to attain peak physical fitness but its not until you actually commit to doing it that you really learn what it takes and how to achieve your goal. Knowing what to do is much easier than doing it!

Likewise, if you want to get to the top in any business, sport or endeavour, nothing beats the hard yards of constant training and ´match´ practice. 

 

 

 

And remember, when you start in the trading business you are pitching yourself against some of the sharpest minds and best performers / practitioners in the world who do this professionally for a living.

 

So there is no getting around the fact that your only job is to perform at the same level. If you want to be one of them, you have to be ´on the pitch´ and doing it. You have to perform and be on your game - constantly.

 

Sure, you first have to learn the analysis part which takes a while but with guidance and practice it´s not too difficult to get to the point where you can spot where the ´better´ opportunities lie.

However, it's one thing to be able to analyze your charts, it's another thing to execute, risk manage and realize that opportunity and deliver peak performance. 

The below visual is an apposite representation of what I´m talking about.  

 

 

 

 

 

 

NB: The gold is in taking action, not in the analyzing! 

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While you´re here - a few words to the wise.

 

 

 

In no particular order - just things I´ve learnt over the years and think are worth a look at.​

  • Trading can be very rewarding, financially and personally. It can change your life - but it is not an easy ride - especially when you are just starting out. All traders who last the course know from personal experience how tough this game is. I made plenty of mistakes at the start which cost me time and money. However, I don´t now look back on that ´learning period´ with any regret. In fact quite the contrary, because I know it helped me. Aversion therapy is strong medicine! 

 

  • Making mistakes is part of the education process but there are some things you needn´t have to experience personally to learn from them. Forewarned is forearmed as they say. Get yourself educated. But one thing is for sure, to achieve your goals like anything else in life, you have to put in the work and learn the business from the ground up. Jump in blindly and you´ll lose your money - it is as simple as that.

  • Your emotions will play a part in your trading. Forget what people say about being robotic or emotionless - its just not like that - you will feel it when you trade; even more so if you are in drawdown, and sizing up can be tough with regard to your mental capacity to hold it together :). For many it´s down to fear or not being able to deal with uncertainty, for others, anger or frustration. But, the problem is - which we all inherently understand - is that the fear of losing or any other negative emotion will prevent you from winning. To paraphrase F. D. Roosevelt, there is nothing to fear (in the markets) but fear itself. Similarly anger and or frustration will get you nowhere fast. You just have to learn how best to control these emotions, and this comes down to trusting your strategy, focusing on beneficial habits, and accepting the risk ´upfront´. 

 

  • It also helps to realize that your trading career is not a sprint but a middle to long distance race and there will be times when you don't think you´ll make the finish line. Sometimes it does make sense to swing for the fences and bag the home runs but you need experience to know when these conditions exist - until then its best to take it slow and steady.   

  • There is no ´holy grail´ set up or trade. The only holy grail aspect to trading is to have a process driven system, a plan that you execute accordingly and a clear understanding of risk. ​

  • Trading is not easy, clear cut or straightforward - nothing in trading fits that description. The thing is, you just have to accept that this is what trading is, adapt your mind to the reality, be flexible and use it to your advantage. Once you do that, you´ll stop trying to ´fight´ the market, realize the market is always right and be comfortable going with it instead.  ​

  • At times trading requires a more nuanced or deeper reading than the more ´standard´ technical analysis and fundamentals. For example a particular currency pair may be on the move at any point in time due to M & A activity whereby a corporate may be buying an entity in another part of the world and needs local currency to complete the deal. Similarly you need to have a feel for how bond markets affect currencies, the difference between nominal and real yields/rates and how intermarket relationships can affect markets across equities, currencies, commodities and fixed income.   

 

  • The above said, trading doesn´t have to be complicated at our, pejoratively termed, "retail" level. It is complex but once you understand what moving parts are in play at any particular time, the context of the day, week or whatever time frame you are trading and have a process that accommodates for it, it needn´t be complicated. Indeed my own method is incredible simple - its lines and levels - a bit on the side but basically that's it.

 

  • Trading is as much about waiting for the set up as it is in actually executing. I´d say probably 80/20 - if you don´t have patience to only take the better set ups - it will quickly burn you out as a trader.  

  • You don´t need to know every style or method of trading. You need to find and learn one that suits and resonates with you. Admittedly, this might require testing out some ´blind alleys´ but the search is all part of developing as a trader.  Once you find what works for you and feel comfortable with it, the rest becomes so much easier. 

  • There is often a great deal of debate about whether to trade a ´set up´ across any number of assets / instruments or to focus on just a couple / few instruments, get to know them well and trade only them. It´s horses for courses and circumstance dependent but for me trading only a few assets / instruments is far more rewarding

  • Never take action / trades based on other peoples views. You have no idea in most cases how they are trading, their risk reward parameters and or their motivation in making trade calls / recommendations. Think and act based on your own analysis and above all else trade what you see not what you think!   

  • Hesitation, prevarication, procrastination, waiting for confirmation (whatever that is ?) kills trading profitability. Failing to act is a mortal sin in trading. However, I should add that there are times when not trading is the best ´trading´ you can do. If there is nothing to do - do nothing.

  • Never have a P & L goal that guides your every move and action. Much better to focus on process and system goals. Chasing the ´green´ will most likely put you in the red!

  • ​There are no secrets held by the financial ´illuminati´ which, if you knew, would instantly turn you into a megastar trader. You can normally spot this on trade ´educators´ websites or YouTube channels by phrases such as "They didn't want me to tell you this..", "Trade like the banks..", or "Smart Money concepts...".  In the main this is complete nonsense. Banks these days do not operate like "retail" traders such as you and me using price charts. It may have been the case in the past ( and I´m sure some outright directional trading still goes on) but times have changed. They tend to trade volatility using options and the principle of Delta Hedging rather than outright directional moves. Their over-riding aim is to make money whichever way price moves. Sure this strategy can lose as well but using the deep mathematical resources of the quant departments and very sophisticated models of market volatility they don´t do too badly! The key take out from this point is that you most likely cant trade like banks because you just don´t have access to the resources they have and bullshit youtubers saying you can is pure marketing clickbait. If you want to trade like a bank go work for one! 

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  • Similarly forget all about checking your charts for a few minutes while you´re in bed every morning or on the beach and making a fortune. Get real, this is a professional business - if you are not able to be likewise - forget it.

  • Wherever you see the word Lifestyle or a picture of a Gucci shopping bag and or a Lamborghini - well, what can I say - if you fall for this you really should consider something other than trading :). If you are looking for a trading coach make sure they actually trade and don´t simply make money from broker commissions and ´shilling´ courses! This sort of stuff is particularly acute in the crypto trading scene right now - be alert.

  • To get a head start the best way to start in trading is to find someone who has been in the business for some time, can show results and has a strategy that works and follow what, why and how they do it. It makes absolute sense to learn from others. Its how everyone in every profession learns the ropes! There is a "big issue" in "retail" trading relating to GURU´s,  FURU´s etc. on which I could say more but not here. However, its not that hard to find someone who performs and that you can trust. Learn from them, copy and adapt!  

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  • Finally, at the end of the day you do have to develop a flexible independently minded approach. Bearing in mind that you should learn from others as said above, blindly trying to follow someone else´s strategy without internalizing that approach and adapting it to what suits you best will not get you where you need to be. You have to ´own´ it and make it your approach. Only then will you actually start to understand it, believe it, trade it and make money from it. 

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