5 Things that Traders Must Learn to Accept


While my journey to be a market wizard continues, here are a few things that I feel are important.

5 things that I believe every trader must learn to accept.

1. Market is Random

The financial market is a meeting point for many traders – both big and small players – to buy or sell the financial product. Since the financial market is accessible globally, the trades in the market can be done by anyone, from anywhere (in the world) and with any funding background.

Think about this.

If you are a London banker and you want take a sell position in the Gold Futures because of fundamental reasons, you can do it by placing an order with your broker at a certain price. That order can be taken by a trader sitting in Sydney, representing a hedge fund, who believes your price is suitable for him because of Technical reasons. With that combination, the price moves.

As a trader in London, you have no way of finding that out in advance. Hence, anything can happen in the financial market, for any reasons and it can sometimes turn out to be a complete surprise a.k.a. Random.

2. Risk

balancing-actWithout Risk, there would be no potential for profit. Hence, it simply means that traders need to accept risk before they can even be profitable.

As mentioned in Pt 1, the market is random and there are many areas that are unknown or that is beyond our control. Being able to accept Risk is to be able to accept these unknowns. Above and beyond that, you need to be able to manage What You Don’t Know by controlling what you know.

Traders need to embrace risk by making a conscious effort to take calculated risks. The more you expose yourself to risk, the more you will feel pain but if you arm yourself with the right tools, in the long term, the rewards will be greater. As Curtis Faith (taken from his book) says it:

… when equipped appropriately, even the most risk-averse person can embrace and profit from risk…”

3. You Don’t need to Know Everything to Make Money

Each time traders get beaten up by the market, they think they there is something else that they don’t know or are missing from their equation. They get frustrated and annoyed because some other trader made money, from the same market, using a different system and they want a piece of it. These traders will chase after the Holy Grail trading system, a Secret to trading Wealth or even after the ultimate indicator. They just want to take in more information until they eventually get burnt out.

Again, as mentioned in Pt1, the market is random and you will never learn enough to anticipate every possible movement that the market will take. Predicting which trade the next trader will take from a different continent of the world is also not something that can be learnt.

As Mark Douglas says it (taken from his book), traders need to accept that they do not need to know everything and can still be profitable. Instead of learning more, what traders really need to know is:

a)      the odds are in your favour before you put on a trade;

b)      how much it’s going to cost to find out if the trade is going to work;

c)      you don’t need to know what’s going to happen next to make money on that trade; and

d)     anything can happen;

4. Mental Analysis is More Important

Zen“Zen” is what some people call it these days. In layman terms, that just means being in a neutral state of mind and being in the NOW. More importantly, being able to make unbiased and rational decisions.

Well, in my view, that’s the key to trading success. However, having to ability to get there when the market place is so noisy and our internal mental state is so fragile (at least for some) will require some extensive amount of work.

Once you’re able to achieve that, trading becomes easy. So easy that you’ll wonder why didn’t you start working on mental analysis any earlier?

5. Every Moment in the Market is Unique

Some traders have the tendency to over-analyse the market, they’ll take out their so called crystal ball and hope, wish and pray that they can see the future. Or they may have met with some losing trades recently and the idea of recency bias haunts them. These traders start to think that there is a relationship between the present and any past trades.

Unfortunately, there is no such thing. Traders need to learn to accept that, while the financial market is random, every moment of it is unique.

We all know that the market offers plenty of opportunities. However, the key is not to focus on when the opportunities will arise. Instead, traders need to focus, not in the past or the future, but in the present. Traders need see and be clear to recognise that every opportunity flow, every trade set up, every market pattern and, hence, every moment is independent of each other.


Thank you.

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