Live Q & A Topic – Market Study Bootcamp

Join us for a real time discussion of how to formulate high-quality market study questions and then use Acme + Excel to find some answers.

Topic: Market Study Bootcamp
When: To Be Announced

This is a free event for Rancho Dinero members, and y’all can register here. If you’re not yet a member, you can become one in just a couple of clicks.

Asking The Wrong Question

Here comes something of a rant. ;-}

There’s been a rash of questions lately about what “advantages” certain studies or indicators give a trader. It’s funny how this happens sometimes. We’ll get a bunch of inquiries about this or that topic that all come in at the same time. I imagine someone in the trading world has planted an idea that a particular tool gives independent traders an advantage over other traders or the markets in general. Folks latch on to this (admittedly seductive) idea and then set out on a quest for the Holy Grail. Shows you the power of a meme, I guess.

But I really want to answer by saying – and here’s the rant part – you’re asking the wrong question! The question is wrong not because it doesn’t have an answer. Some tools and methods are indeed better than others in very specific ways. Instead, it’s wrong because the asker will never be satisfied with the answer. I mean any answer. If a trader is told exactly what she (thinks she) wants to hear she’ll be instinctively dubious. If she’s told something other than exactly what she wants to hear, she sees this as cause to continue her quest for tools and methods to give her this mythical “advantage.”

It’s not really in our interest as purveyors of trading technology to say these things, but I’m going to anyway. It’s my blog, and i’ll rant if I want to (lol):

  • As an independent trader, no charts or indicators can give you the Grail-type “advantage” you seek. All charts and indicators – no matter what kind – are like gauges on the dashboard of a car. They are driver aids, information monitors and quantitative assistance. But gauges don’t drive the car. So it is with all technology for discretionary trading. Technology presents information, but it’s up to you to act or not act based on the information you see, fail to see and/or ignore. Full stop (pun intended).
  • By relying on technology to turn green or red, stoplight-style, and tell you to act or not act you’re not really taking responsibility for your trading. Continuing our dashboard analogy, when a car’s gas gauge reads nearly empty fuel must be added to the tank. If you, the driver, don’t do this due to omission, commission, lack of understanding or delusion (the hope that fuel will appear in the tank because it has to) you can’t blame the car when it runs out of gas for not giving you a “transportation advantage.” You’re the one in control of the car and its fuel supply. I think the most common motivation for the Grail Quest is that  many traders  are quite afraid of the thought of being wrong (and consequently losing capital). Quest-ers have not yet realized that the Best Trader on Earth is going to miss or misread the situation sometimes. The Best Trader on Earth will fall prey to false hopes from time to time. And even the Best Trader on Earth is going to be just plain wrong at times.
  • As an independent, I think if you want to find success in the markets you have to find a way to be OK with being wrong. I’m not saying you have to like being wrong. I am saying you have to accept the fact that you will be wrong and then practice minimizing its impact on your psyche and performance. You can do it, though. You can train your brain to realize you’ll survive and recover from a temporary state of wrongness. Then, and only then, does this fear become a far less fearsome psychic threat.
  • You’re not in competition with anyone but yourself. The markets are not a race, at least not in the classic sense. You can’t go head to head with another trader and beat him to the finish line. As an independent you have no control over the outcome of your positions. You only control your risk. So once you’ve reached a certain level of proficiency at operating your car, so to speak, the next stages of your journey should center on developing mastery over yourself (emotions and actions) when behind the wheel.
  • As an independent you’ll always be at a disadvantage, both informational and financial. I don’t mean to sound fatalistic. Quite the contrary. I’m being realistic. All other things being equal, major market participants will always have better information and more capital than you do. Independents who are still developing their own style, in my view, should disabuse themselves of the notion that they can see or know anything that the pros can’t. Instead, focus on learning to see as the market movers see, learning to detect when they act and studying what their intentions are likely to be based on evidence of their prior actions. If you don’t believe it now, with persistence, study and the right mindset you will eventually realize that the better informed, better capitalized participants are actually pretty predictable once you understand the parameters under which they are required to operate.

Granted, most of this has been said before elsewhere. This is a word salad rant, not ground-breaking literature. But since the question never seems to cease being asked I imagine posts like this will never cease to be written. And so I’ll say what I always say one more time. The only Holy Grail that exists in trading is the one between your ears®. Maybe that should be our new tagline. Notice the ®?

Have a great weekend, amigos. And trade ’em well next week too…

Live Q & A Topic – Value Trading Techniques

 

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[iconbox title=”Unable to attend live?” icon=”x-office-presentation-template.png”]Not to worry, the session was recorded. Members can watch it now.[/iconbox]

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Join us for a real-time discussion of value-trading techniques for the index futures, oil and maybe even precious metals and/or the Euro too.

Topic: Value Trading Techniques
When: Thursday, June 21, 2012 – 2:00-3:15PM PDT

This is a free event for Rancho Dinero members, and y’all can register here. If you’re not yet a member, you can become one in just a couple of clicks.

Live Q & A Topic – Order Flow and Volume Deltas

 

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[iconbox title=”Unable to attend live?” icon=”x-office-presentation-template.png”]Not to worry, the session was recorded. Members can watch it now.[/iconbox]

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Let’s talk about that great mystery known as order flow. What it is, what it’s not, what it can mean and when to ignore it.

Topic: Order Flow and Volume Deltas
When: June 7, 2012 – 2-3PM PDT

This is a free event for Rancho Dinero members, and y’all can register here. If you’re not yet a member, you can become one in just a couple of clicks.