Have you been hurt by these 3
by Mike Mc Mahon of TradingAcademy.com
The Economy is still on shaky ground and the Markets
are not quite sure what to do. They rally, they fall back.
We can apply all the Technical Analysis, Fundamental Analysis,
and Economic Guru talk we want and still not see a clear
path. This has become a traders market
but only for the adroit.
When will it change
as Mitch Cariaga says, Only
And the rest of us have to guess.
But the good news is that it will change. It will start
to smooth out again, trends will return. Unfortunately,
many reading this right now are thinking, Yeah,
Ill be ready to buy again ooops, I
didn'tt say it would change to the upside, now did
This should be a clue to your possible bias. In any case,
the market will start to change. Many have been hurt the
last couple of years because of three major points
1.) Lack of Appropriate Knowledge; 2.) The Inability to
Do the Work Necessary and 3.) the lack of Humility to
Accept that you Cannot Control the Market.
of Appropriate Knowledge
this goes far deeper than the ability to spell stochastics.
Too many people believe that they can make money
in the market because they have read books, attended seminars
and feel comfortable with Charting or Fundamental analysis.
Yet, the real knowledge that they need is the intimate
workings of the market. Yes, TA, Fundamentals, Level II,
Order routing, Execution and others are all vital
but that is the point, they are ALL vital.
Learning one discipline and hoping it is the answer
is not the road to success. Unfortunately, it is hard
work and requires a deep understanding of self and the
strange world you're stepping into. Most want a system
that someone else did the hard work on Heck,
why should I re-invent the wheel? Well, the why
is because it is going to be your wheel.
Someone elses view of how the market works may
not coincide with your vista, your understanding. Yeah,
but if it works, then I will be happy with the money.
It did work Past Tense - but the market and conditions
change. You must change with it.
Inability to do the work successfully
- I attended
a trading workshop this morning. I got a lot of goodies
out of it but the instructor said something that really
stuck with me I am paraphrasing here He
asked, If I gave you 6 rules to follow and guaranteed
that they would make money for you, how many of you would
follow those rules? Needless to say, the audience
was unanimous in their willingness to follow the rules.
After all, you cant be too rich.
His next statement was the ringer, The reality
of it is only 10%, or less, will actually follow the rules
most will skip a rule, some will interpret the
rule, others will add rules few will follow them.
I thought about this and I realized that risk management
and discipline were (AGAIN) the difference in most successful
traders. Being given a system without doing
the work to develop it for yourself allows you to be suspicious
of the system. Being suspicious, we then fool
with it and defeat its original purpose. Being suspicious,
if things go against us, we can blame the damn thing.
However, if you do the work, build the discipline yourself,
then you understand the mechanism and tend
to trust it and you can only blame yourself for its weaknesses.
Sure, it may need tweaking over time but it is yours and
you understand it. You have to do the work or you
will be subconsciously suspicious (if it works so good,
why did they sell it to me?).
3) The Lack of Humility to Accept
that you Cannot Control the Market -
The Market is mightier than even Alan Greenspan (Who can
leap over a tall economy with a single bound!). What then
of your musings? I know this stock will come back,
its a good company Nothing goes
straight up or straight down (See Enron not
perfect, but straight enough for me).
My point is that we have to accept what the market will
give us. I often say in class, You cannot MAKE money
in the market, you can only be there, open to the opportunity
to humbly receive the money the nuance is
lost many times. Your analysis, your planning, your execution
will not shape the market quit trying
and learn to get in sync with it.
Spend a large amount of time just watching the dance
and be humble and thankful when you have
winners, and learn to accept the losers that inevitably
come. Develop humility; understand that you can go
with the market at best and learn to admit you are wrong
quickly and cut those losers off at the knees. This will
build discipline for you.
Perhaps you need some help a proper education
is a good start stop guessing or reacting, start
thinking and learning.
Just some thoughts...and of course, I'd love to see you
in one of our courses at Online Trading Academy, so we
can discuss this further!
Article by Mike Mc Mahon, Lead Instructor
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