Wednesday, January 25, 2012


                                          Trading Simplified

You will find very few other endeavors in life that can be as simplified as trading. The ‘catch”, though, is that while other things may take many weeks, months, or even years to manifest themselves, trading cuts to the chase rather quickly.

When I talk with people about trading, usually it takes very little time to bring out the frustrations they experience.

“I buy it goes down; I sell it goes up. I always make the wrong call when I enter a trade. I stay current on the issues; I read voraciously about the market and study charts for many hours. I don’t mind losing, but does it have to happen within 10 minutes? Blah, blah, etc., etc.”

When you focus on the wrong element of trading, what do you expect? Why should you be rewarded for putting your energies in the wrong place? If markets could be “figured out”, long before you arrived on the scene many others equally brilliant as you would have all the money in the world by now and there would be none for you or me.

All of these reflect a determination to understand a market. For many reasons, you can never fully understand a market or how it moves. I don’t necessarily want or need to understand a market; what I need is to PROFIT by a market. And there is only one way to CONSISTENTLY do that.

Over the years, many people have approached me regarding trading, and almost without fail the first thing they want to know is how to understand a market. I know right then and there it’s going to be a long discussion because there are going to be things they aren’t gonna want to hear.

Everybody, including my mother, thinks there is a secret formula for untold riches. There is, but definitely not like you think; it’s not an equation but a formulaic process.

We tend as humans to get very frustrated at events [trading or otherwise] that fall outside our sphere of understanding because we can’t make the connections between cause and effect. Nowhere is this more evident than in trading.

Long term trading profitability is not derived by event certainties; trading profitability is derived from probability distributions that are skewed in your favor. Until you come to grips with this, trading is likely to be a very long series of “Whack-A-Mole” decisions that are very much skewed in the wrong direction.

Have a great day everyone.


P.S. Today’s Action & Wrap Up at

No comments:

Post a Comment