The calm before the storm

stormMuch like patience, the successful trader exhibits a simple, unexcitable mood in the face of a market that is in a constant state of flux. There is no way you can have emotionless trading. It is impossible unless you turn into a robot. What is possible is to bring your emotions under control. While others panic, cry, throw temper tantrums (and their computer monitors), doubt their trading edge, etc. you remain calm in the knowledge of your simple rules based methodology. You know when to enter battle, you know how long you can stay in battle, how many resources you can commit to battle ($), and when to exit the battlefield.

Not That Simple

One of the biggest problems I see new traders struggle with is the mindset that somehow trading can be approached differently from other ventures or activities. This is something which either comes from too much focus on the prospects of profits and easy wealth building (greed, in short) or from just not considering that it is an activity which requires skill to do well.

Trading is easy. I mean pointing and clicking to buy and sell is about at simple as it gets.

Playing guitar is easy too. Just pluck or strum. No one thinks they are going to pick up a guitar and become the next Jimi Hendrix, though. They know it takes hours and hours of practice to develop even a basic ability to play, nevermind getting to the point of having people pay to listen to you.

Why do people think that things are different in trading?

Good trading requires learning and practice – just like anything else you want to get good at. There are no quick solutions. Don’t expect them, and don’t let anyone lead you to believe that there are.

Observation, Experience, Memory and Mathematics

“Observation, experience, memory and mathematics – these are what the successful trader must depend on. He must not only observe but remember at all times what he has observed. He cannot bet on the unreasonable or the unexpected, however strong his personal convictions may be about man’s unreasonableness or however certain he may feel that the unexpected happens very frequently. He must bet always on probabilities – that is, try to anticipate them. Years of practice at the game, of constant study, of always remembering, enable the trader to act on the instant when the unexpected happens as well as when the expected comes to pass.

“A man can have great mathematical ability and an unusual power of accurate observation and yet fail in speculation unless he also possesses the experience and the memory. And then, like the physician who keeps up with the advances of science, the wise trader never ceases to study general conditions, to keep track of developments everywhere that are likely to affect or influence the course of the various markets. After years of the game it becomes a habit to keep posted. He acts almost automatically. He acquires the invaluable professional attitude that enables him to beat the game – at times! (more…)

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