Drop All of Your Preconceived Ideas of … everything?

Ok, I am not saying that Bear or Bull markets don’t exist or that they don’t have a distinct look to them.  I am saying this, “IT DOESN’T MATTER.”

I have been a self-proclaimed “bear” since, at least, January this year and from about 1.3100 on the E/U.  What’s funny about this is we spent the majority of 2011 above the 1.40 mark.  All I can do is laugh.  Another example is I have initiated 237 short trades and only 23 long trades this year.  How am I not broke you ask?

Simple. Bears make money in Bull markets and Bulls make money in Bear markets.  This is one of the reasons I don’t listen to market commentators or take trading advice from other traders or the recommendations of OANDA or live my life according to a set of rules established my others.  A lot of people would have you believe that you have to be a Bear in a Bear market or a Bull in a Bull market, otherwise, you’ll get caught with your pants down as well as your account balance.

I guess what I am trying to say is this, it’s not the fact that you correctly “read” the trend or deciphered the chart so well that the side you picked was the right one. (When you stop caring if you are right, you’ll know you are on the right track.) The fact of the matter is this, if you get in at the right time and out at the righter time while not letting the market keep any of your money, it doesn’t matter what direction the last 1,500 bars were moving.

I started out as a very “by the books,” money management, risk/reward ratio nut job. I would argue that technical analysis was the only true was to make a dime in this industry, those fundies could go jump off a bridge for all I cared. Then I started listening to what was going on in the world from sources OTHER than traders and news anchors.  I slowly started shifting to a hybrid-method, adapting micro and macro economics into my trade plan.  I would beat the dead horse of having to have a stop-loss and take-profit in place with a 1:3 risk/reward ratio…then I would lose 2% of my account every trade.  I listened to everyone when they said a Martingale approach is suicide.  I listened to people when they said “trade with the trend, it’s the only way to make money.”  I lost money hand over fist for a year and a half.  I couldn’t give it away fast enough.

I gave up trading. I started observing. I really don’t know how to explain it.  A blogging buddy (@andrewunknown) just started a new blog about minimalism trading and he has a much better way with words so I’ll let him describe the theory of it.

Sometimes it is better to do something then nothing.  In other words, stop over-analyzing the situation and make a decision.  Stick with that decision until you see a reason it isn’t valid any more.

What I am trying to say is this, (and I have been beating a dead horse) don’t listen to anyone when it comes to your trading.  Trade what you see based on a system that you have developed.  And if you do start to take any advice at all, take this guys advice first.

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2 thoughts on “Drop All of Your Preconceived Ideas of … everything?

  1. Great post, Mike. It looks like we do things differently. Maybe we’d disagree on the right way to approach “the market”; or to cut a PB&J sandwitch (I like my done diagonally, like mom used to do).

    No. No, we wouldn’t. Because we agree on an overarching principle: fallibility is a characteristic we all share.

    There are thousands of variables that can comprise our makeup as a trader. We observe how others have combined (and, more passively, are the combination of) these with successful results. Some of those variables are personality attributes. Some of those variables are tools we’re exposed to, and subset of that the tools we use and don’t use.

    And there’s experience: the successes, the pitfalls; the advice we take, the advice we don’t and the results that come. Eventually, we’ve worked through enough of that; and if we’ve been observant, studious and learned lessons of real courage and humility, we reach a point where we are our own best resource. In areas indirectly related there’s a lot to learn from others and a lot of valuable opinions in areas of economics, behavioral finance, etc.

    But the best way to trade – methodologically and day-to-day – is a question and a pursuit that demands ongoing personal discovery; and of all people, regarding *me* I am least fallible in that task.

    I need to put the finishing touches on my next installment. Thanks for the “reminder”!

  2. Thank you sir. I am a diagonal sandwich eater too, you can take advantage of the corners for more efficient consumption.

    Can’t wait for your next post…I have been checking frequently!

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