The Art of Trading 3

An intelligent man read everything about Science, he became a Scientist. He read everything about Philosophy and became a Philosopher. Then he read everything about swimming and he drowned!

Trading looks deceptively easy. It is one of those activities where a person who knows absolutely nothing about it has a 50% chance of being right. Let’s face it, you can only either buy or sell. This beguiles people into believing that it’s a lot easier than it really is. Trading is simple, it just isn’t easy. It isn’t easy because people are poorly predisposed to understanding and dealing with chaos. We are schooled to be reasonable and objective but the market is not reasonable and objective. The market is people interacting together, people who make decisions based on their beliefs, feelings, emotions, education and all sorts of other things. So its very nature is chaotic and not reasonable or objective. Trying to use all sorts of objective, reasonable and rational sounding measures to understand the market is like trying to measure the edge of mountain using a straight edge. The shape of the mountain is irregular so it defies absolute values of traditional measurement. This is why 90% of traders lose money and become paymasters to the 10% who win. Trading is a zero-sum game meaning the money you lose is made by somebody else and the money you make is lost by somebody else. The idea is not to try to predict and rationalize the chaos; it is to accept it and to move with it. This is the secret to trading – want what the market wants.

Good trading is a lot like good dancing – you have to enjoy what you are doing while you are doing it, you let the music lead and you go with the flow. For the sake and beauty of music, I pray there is nobody who plans how they are going to dance before they even hear a song. This is one of the most pathetic and hopeless sights one can ever be burdened with witnessing. This might sound absurd but this is what trying to make predictions about the market is like. The market each day is like a new song, one you have never heard before. The idea is to be responsive and the way to do that is to have presence of mind – be content with not knowing what to expect, listen and go with the flow.

“No man ever steps in the same river twice, for it is not the same river and he is not the same man.” Heraclitus

Be abundantly blessed.