Saturday, July 14, 2012

A couple of thoughts, and a harsh fact

A couple of (hopefully) thought provoking sayings:

1) Good judgement come from experience, and experience comes from poor judgement;
2) Profits come from understanding, and understanding comes from losses.

From a trading perspective, the above should be pretty clear.

There are plenty of good traders out there, who are available and able to help advising those either starting out, or who have been unable to consistently make profits. Some peddle nothing more than a load of rubbish, and/or force you into paying exhorbitant fees to learn very little. A lot of these types also cannot back up their claims.

However, there ARE genuine traders who gladly offer help and advice where possible, and make their their own systems or methodologies available to those who want to learn.

The trick is to settle on a type of method that interests you, and also that you believe is fully compatible in how you think YOU can trade the markets, when taking into account the type of instruments you want to trade, the amount of time and effort you are able to devote to trading, your preferred holding period and timeframe, and the amount of equity required to trade that particular method. It's no use, for example thinking that you can obtain specific advice from a day trader when you cannot spend much time in front of a PC during the working day, or if you want to hold positions for several weeks or even months.

Once you have settled on a 'methodology', find a good trader or mentor who can guide you towards achieving your goals. Such a person can help you 'short circuit' the periods of poor judgement and/or losses, giving you a head start. Those that are successful have been for a reason - they use strict risk control, they have a method that makes money, have been able to navigate their way through differing market phases, and have come through the other side. Why would you not want to listen to what they say and benefit from their experiences? The best ones will happily offer help or advice.

Beware of those who do not fully disclose ALL the rules of their system, or who continually push new or 'updated' methods or systems that cost even more money. Remember that, in the vast majority of cases, simplicity is best, and a good system is a robust system.

Finally, once you have decided on a chosen path, MAKE SURE YOU STICK TO IT AND GIVE IT A CHANCE TO WORK. In order to achieve confidence in the method, and that, from a psychological point of view, you are able to cope with the drawdowns and the frustrations that you will encounter, over a reasonable period of time, preferably covering differing market conditions (be it uptrends or downtrends, quiet or volatile). If in doubt, seek advice from your chosen trader/mentor and follow what they say.

The harsh fact is, if you have gone to all the time and trouble to settle on a chosen method, and you then ignore the advice given, or decide to override the signals or the risk controls, then the best trader in the world wouldn't be able to help you. Ultimately, the desire and willingness to learn, to absorb those lessons and to be comfortable in implementing them has to come from within.

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