De-Mystifying Trading

Discussion in 'Trading' started by SimpleSimon, Apr 21, 2003.

  1. I would like to address an idea that came to me that I think would be of benefit to newer traders. There is a certain mystic that surrounds successful trading and often times it is perpetuated by some traders because it assuages their egos.

    I'm definitely generalizing but often you will hear that successful traders will need to be " brilliant strategists with lightining like reflexes and nerves of steel".

    But the reality is that although those qualities are all admirable they are far from necessary to be successful in the markets. First, although strategy is important it does not have to be brilliant. A mediocre strategy executed with discipline and consistency is enough to succeed. I'm defining success as a positive P&L. Secondly, a trader has many options available to them so as not to require super quick reflexes. Scalpers and those doing arbitrage will certainly need it in large supply but there are so many methods which do not require it. Many successful traders only put on 1 or 2 trades a day. Sometimes even less than that. And last, having those big balls (women I mean you too because it's just a figure of speech) is just a creation of a large ego. Experienced Successful traders practice solid money-management. They only risk a very very small portion of their capital on any given trade. Not exactly a swashbuckling scenario. On the contrary, over time , putting trades on may begin to seem routine.

    So there you have it, trading de-mystifyed, and something very achievable even for the most "average" of people.
  2. Good thread. Help "Keep It Simple".

    Let's demystify the stock market itself. Let's discuss what really moves the markets, and get an overall view in simple terms of what is really going on with all this money being passed back and forth, which we as traders are trying to pick up the little bits that fall through as it is passed around.
  3. jvasto


    Very incouraging post, thank you.
  4. Jake777


    I partially agree with you - I think you made very good points there, SimpleSimon.

    However, I don't know if it's that simple. I would like to give my opinion. Please be aware that I'm not a big time trader who made 7 figures or anything like that (one day, I believe that I will be like that, but I'm just not there yet).

    I think the "talent" needed to make it in the trading are as follows -

    1. reasonable intelligence.
    2. reasonably good health - people overlook this, but if you're sick, or if you're afflicted by some chronic condition, then you just cannot do well, especially in something that requires clear thinking, like trading.
    3. the right psychological make up.

    All those things above, plus the hard work will result in a successful trader, I believe.

    I think the most important thing, and the most difficult thing is the right psychological make up.

    This sounds simple enough, but I dont know if this is something that is that simple. I think the right psychological make up are as follows -

    1. independent thinking
    2. ability to be wrong without getting discouraged
    3. flexibility in thinking (not getting dogmatic)
    4. fighting the tendency for self destruction (I'll explain more below)
    5. confidence
    6. tenacity
    7. a whole host of other things, that I just don't know about, yet

    Again, this is just my opinion, but I think these things are really hard to have, for many reasons. #1 through#6 are things that a lot of people do not have. I truly believe that. I think this way because I know a prime example, ME. I've gotten better at these things over time and hard work (except for #6, which I never had too much problems with). But recently I've discovered that I might have a problem with #4. I never thought that way, but then I examined my patterns in trading and whole lot of other things in my life, and it seems to be true. Again, I'm not a psychiatrist or anything, so who knows? But it seems like it's the case. Freud said that many people have a tendency for self destruction, ranging from really extreme to mild.

    Whooopeee, I got another demon to fight now. Hahaha, I guess it never ends. Because even if I get good with #4, maybe there's another one waiting for me out there, that I just don't know about yet.

    So what it comes down to (again, just my opinion), is that a lot of people lack this psychological make up. Many don't want to get these things because it's a daily, if not an hourly battle to have this right state of mind. That is assuming that they're even aware of the fact that they do not have this right psychological make up. I think that this is the reason why there are such few successful traders compared to traders who are not successful (based on success equaling positive P&L, consistently).

    Can the right psychological make up be acquired? I think you can improve to a certain extent, but not more. I believed once in my life that you can make yourself out to be anything that you want. But more I look at people, more I read, it just seems like some people cannot do that. They have tendencies, and they just cannot get away from it.

    WHo knows what the answer is. Maybe I'll find it. Maybe it's not really there to be found. Maybe it's never obtainable, even if it's there. Hahaha, this sounds like crazy hippie talk or something.

    again, just my opinion. Thanks for listening.

  5. Thanks for reply Jake. I agree with you. The humorous aspect of trading is that the simple is hard to do. A paradox i suppose. All traders struggle with psychological issues. It never ends but it they can be overcome. That's the hard work part. It's not just about sticking your head into a computer to research strategy, but taking an honest inventory of your personal weaknesses and resolving to overcome them.

    My point in this thread is that new traders have enough to contend with figuring out what their strategy will be and working on themselves. The last thing they need is negative reinforcement which suggests that successful trading is only capable of being accomplished by individuals with some super innate talent. As I have said in some other thread, I believe trading is a learned skill which can be accomplished by some very average people if they're willing to do the work.

    Again to reiterate, I did not mean to imply that it's easy!
  6. there's a LOT of truth in what Jake said!

    So SS, why is the "simple" hard to do?! Give us an example of "simple" that is hard to do... and why you think that is so!

    And what you.. personally... would do about it.


  7. First off let me preface by saying that I by no means want to come off as "Joe" trader. If I have then I 've goofed big time. My motivation for contributing here at ET is this, over the years I have gleaned information from others which has helped me progress. Some technical in nature, some psychological, and some in areas such as what software to use, etc.. I felt it was wrong to take all the time and not contribute something myself. I'm not very skilled in computers and so forth but I do have much experience to share.

    In response to why is the simple hard to do, I believe it's a discipline issue. For some strange reason, human nature seems to allied against following a plan and sticking to it. I can't tell you why that is, only that it is. What I do to combat it is to write down what my strategy is down to the most minute of details. I keep it next to me at all times and I refer to it frequently. Occassionally I will modify it if I feel it is necessary, but whatever my most current plan is I follow it to the letter. This includes my money management strategies as well. For me I try to keep things as systematic as possible even though I probably would classify myself as more of a discretionary trader (a discretionary trader with a PLAN!).

    Jake had some very good points made. But I urge you to contemplate this: Suppose a trader does have some self defeating tendencies. Is it not true that they will carry those whereever they go Why not confront them in the trading environment and resolve to overcome them. Just something to think about.

  8. If it was that easy , you'd have all the money. And we'd be tearing down YOUR statue.
  9. "Let's discuss what really moves the markets"

    Yeah! You go first. :)

  10. Jake777


    I agree with you Simon.

    Yes, it's the simple thing that is hard to do. I really agree with you that the having a plan and sticking to it is the hard part, even though it's a simple thing to do. Something simple is not necessarily easy.

    You're right - a sound trading plan is not that hard to find. Also, good money management strategies are widely available to everyone.

    I re read my post, and it seemed a little fatalistic and negative. I apologize to anyone who read it that way, and I'd like to say that that's not what I meant. You have to try, I think, just like anything in life. And think positively while you try. But nothing is guaranteed, and the reality is that a lot will not succeed.

    But I really believe trading is something that deserves a shot. It's something that is truly worthwhile. Not just because you can make a lot of $$$$, but with those $$$$, you can actually do some good in this world, help people out. Why would you help people out? Well, I remember when I needed help many times in my life. Yes, some people shut me out, didn't help, and laughed. But some people really helped me, without wanting anything in return. I owe it to them.

    To the newer traders, the best of luck. (I think luck is really important too)

    Hahhaa, o yea, best of luck to me, too. Cuz I need it!

    #10     Apr 21, 2003