Currency markets close Friday afternoon and open back up Sunday evening. So, on that front no one's equity curve will be moving much over the weekend ;) My positions in the AUD/CAD pair is basically where it was when I opened the third trade.
So I guess it's time to start talking a little trading eh? By the way, I would really love to start some kind of dialogue if anyone is actually reading this and interested. It would help me feel a little better about the direction I take my posts in as far as what to actually delve into content wise. But also, maybe not.
Without the help of an initial question, (or a beer) its kinda difficult to feel on point about where to start. I can only really start from what it is my own opinion worth talking about, which is usually the psychological side of things.
All of us that get into trading do it because we are primarily #1. Hooked on the dream of getting rich and #2. Fucking lazy as hell.
Like I said in a previous post, if you currently just do enough to get by at whatever you do for a living right now, there's a good chance trading is not for you because it takes hard work. On another note, remember the post from Forex Factory about mistakes, and how I said those people don't realize what the real mistake in general is? Well, it reminds me of a great blog I really enjoyed the hell out of reading.
This blog BY AGE 23 follows a young man August of 2008 until July of 2010 in his dream to trade for a living. I found it one day and read the whole thing in a few hours, so it's really not that long. This guy's blog, is a striking resemblance to the struggles of many people who never get there, to profitable trading. I'll have to admit, I was laughing my ass off quite a bit at his misfortune, because he was stuck in a way that so many people trying to trade get stuck. I don't think I was much different though.
They spend countless hours obsessing over indicators, signals and trading systems in the attempt to do one thing: Find a way to basically NEVER LOSE MONEY. They don't know that's what they are trying to do, because they won't admit it to themselves. Yeah, at first they might consciously be looking for a way to always win, but very quickly they come to the "horrible truth" that you must lose money. Problem is, most people never truly accept this fact internally, but only on the shallowest of levels. They become delusional, and they change into something different.
What they think they are looking for, is the way to make the most money while losing the least amount along the way. You will hear idiots refer countless times to this thing called "The Holy Grail". That thing that is the best ever method of trading ever. (EVER) Well, there are a few ways in this world to pretty much guarantee a profit every time, but you and I aren't funded or connected in a way that makes that even a remote possibility for us. And even for those who are, sometimes it's illegal and just not worth it long term.
So, the thing about that blog that had me laughing my ass off, was all the contradictory statements the guy was making... "I need to pick one thing to do and just stick with it no matter what! Starting Monday that is what I will do!" and in two days of losing, its "I backtested a change to the system and this time it's even better!" You'll notice the flip-flopping if you take the time to look at it.
Throughout the entire blog he can't stick to one thing for long at all, and here is one of the reasons why:
He hasn't truly accepted the risk of trading. He is still looking for something that ultimately doesn't lose money. Not only that, I highly suspect he is trading with way too much risk. You never once (that I recall) hear him mention what his risk per trade is, (percentage wise which is all that really counts) but if after literally 3 losers in a row you feel the need to change your system, you are losing enough money to fuck with you emotionally.
I started cracking up because I knew as soon as I heard him say how awesome this new system performed, that in just a post or two he'd be abandoning it for something else. His problem (one of many) was not truly accepting the risk, and/or not knowing his true personal loss threshold. If his system really was so great, why else would a few losers in a row knock him off the path?
A huge problem every new trader faces, is learning what a loss really means. In life, when something doesn't work out, it can often be a sign that we did something wrong, or that something needs to change or that we are going down the wrong path. In regular life, that makes sense in a lot of situations, but there are certain psychological frameworks that are counterintuitive to trading profitably. In trading, losing money does not mean you are a loser! But how many of us have people there to explain that to us??
I strongly urge you to get it through your head, that losing money in the markets does not make you an idiot!
Now, I can't just leave it at that, because THE WAY you lose your money does matter. This will be explained of course in the future, but its basically all about being smart with your capital and doing the least amount of damage to your account so that you will always have a chance to come back for the next opportunity.
There is the widely held idea/myth/legend, that 95% of traders lose money. Well, guess what? 100% of traders lose money. There is no way to avoid it, but there is a way to put the odds in your favor enough to counteract those losses by a multiple and end up positive over the long run.
THAT, is what trading is all about. Being profitable over the long run. And you will NEVER reach that point if you are risking too much per trade. it's just that simple, and yet you can scour the blogs, the forums and whatever and see nothing but a bunch of people so focused on profit and win rate... never truly just accepting the risk and trading safely.
There are so many factors to trading that people don't realize, however trading is not complicated, or at least it doesn't have to be. The problem is, we are complicated and we get in the way.
Come to think of it, if you consider yourself intelligent, look around. How many idiots do you see in your daily life? People who very clearly shouldn't even possess a drivers license. Of all the simple things that humans have been doing for decades, you would think EVERYONE knew how to drive a fucking vehicle, but no... we see it all the time. Accidents for the dumbest reasons. Traffic for the dumbest reasons. Now try to imagine a reasonable explanation as to why any one of those idiots would fare well at trading, let alone running any kind of business successfully?
I used to hear that 95% statistic and let it scare the shit out of me, like "The odds are against you Francisco!"... but you know what? I've actually come to think that the odds are in my favor, simply because I am not an idiot. And I don't mean I'm educated so that makes me smart. There are plenty of people who are well educated who think their success will carry over into trading, and they eat shit. Being educated is entirely different than being smart. Educated people seem to know the rules a little bit better than the principles.
I am not downing an education at all either, I am just trying to make the differentiation between the two.
I think that's enough for now.
-Francisco
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