Trading is one of the most exciting and rewarding fields of work you could possibly enter, but it can also be risky. The giant institutions have spent decades building up their brand, so they have some very high expectations from the flying coin monster hunter world. When they make a mistake and their losses mount, trading firms expect the losses to be made good. This expectation has created an industry that is believed to be exceedingly reliable. Everyone who works in this industry shares secret knowledge with each other that ultimately benefits the big players on the market.
1. Most traders will tell you that volatility is the ONLY thing that matters in trading.
Over the past 10 years, this may be true. However, it was not always so. Every once in a while I dive into the markets and find positions that have been open for months or even years with no changes to them whatsoever. Usually it’s because my system has a lot of flaws and I’m missing some information. When this happens, I’ll look at a few of these positions and I’ll find what looks like an obvious entry point for a trade, just waiting for me to recognize it. Sometimes this happens over and over again as similar-looking anomalies keep popping up.
2. Most traders think that a high IQ is the only thing that matters in trading.
This is true in only one of the two possible cases:
a) You have perfect information, which means you know exactly what’s going to happen and you’re on top of everything. In this case, you can make good trades purely by chance and luck. The odds are against you, but it’s possible if you know what your system will do before it does it. You keep doing this until the normal route of learning from mistakes takes over and your skills gain some actual depth.
b) You don’t have perfect information. In this case, you can’t make good trades purely by chance and luck. Instead, you must study your system from every angle until you EXHAUST everything you possibly can. Then, if there is still fog in your head and nothing makes sense to you, wait for the market to reveal itself. Your mind will try to bring order to the chaos and bring everything together into a simple picture that makes absolute sense. This is where traders get good at reading the market.
3. Most traders think they are making money because they are doing well in other parts of their life or because they’re always late with their bills but never miss a payment.
After years of practice, you’ll find yourself making continuous progress on any trading system that you’re working with. But there are so many other things that can be done in life to make progress, it’s a bit ridiculous to think that trading is all that matters. The natural desire of the human mind is to accumulate things. The real key to success in trading lies in the ability to intuitively understand the market and get completely out of your mind about money and business when you study a trade for several days or weeks at a time.
4. Most traders believe their position sizing is more important than finding a good entry.
This is not always true although it’s sometimes true. A good trader will find a good entry and a good exit at the same time. The question is, what’s more important? In my view, if you’re wrong about your entry and you enter with a small position size, you’ll probably recover with a small loss. If you’re wrong about your position sizing and you enter with a big position size, there’s no coming back from that.
5. Most traders will tell you that there are too many models to use out there for anyone to really take notice anymore.
This is true in the sense that most people don’t realize how much of the information out there is useless for trading models that work even remotely well over time . There are a lot of things out there to see and do in the trading world that can distract you from your path. In my case, I used to trade the Forex markets on ideas from my own mind, but I realized something very important: only about 30% of my ideas would prove profitable. This is a terrible odds when you’re talking about paying for an education, which is what it really costs to trade and get good results. The other 70% would either break even or flat-out lose me money over time.
When you’re thinking about trading, you’re thinking about trying to be right in a very difficult task. You have to make all the right decisions at all the right times, under a lot of pressure, which brings us to this final point. You have to be ready to handle losses and stress. This means that trading should be an interesting and exciting job that gives you a lot of excitement and purpose.
In order for trading to be both interesting and exciting, it must first require that you take some risks on positions. It also means you will be making profits sometimes when good ideas come along with bad ideas mixed in here and there.