Dear friends,
after a year of live trading, reading countless posts, learning from experienced fellow traders came to conclusion to gather all my thoughts and share them with you. Please be advised that these are just personal opinions of a newbie, who is trying to learn something about the essence of trading.
You will not find anything new here. Everything I will say has already been said, stated and discussed in the past in other threads. In this thread I am willing to discuss mainly the philosophy of trading. "What does it has to do with making money?" one might ask. It has nothing to do with making money, yet everything to do with understanding how money is made and lost.
We could trade successfully by using trend lines, support and resistance, candlestick formations and patterns, MA crosses, indicators, etc. But have we thought about why they work? We could be a losing trader, but have we given a thought why they did not work? When you look back to your trade, you will see many reasons why it worked or did not work. We say "aha!" I know what went wrong! Next time I know what to do!
Now stop there for a moment. No, we do not know what to do. Next time is something different and something new. Only thing we know for sure is that we were on the wrong or right side of the trade. Yes, right or wrong side of the trade.
We look at the chart and think price bounced because there was support. When we are always told that price bounces or reverses on support and resistance we automatically detect all these levels that worked. But do we ever look at levels that did not work? What is the probability that they work or do not work? The same is true for candlestick formations and patterns, MA crosses, indicators, etc. What is the lesson to learn.
If we are insistent enough we will go deeper with analysis, spend months, years to align indicators, changing numbers, drawing more lines so that it will look like a total mess. We try to find out magic mathematical formula. Yet, when we see the light at the end, will come across to the same paradigm: it works, but sometimes it does not! This is like zooming in from Universe to atom endlessly but seeing the same things everywhere, the same structures and the same patterns.
What am I trying to say? Allow me to state that in bold: In markets everything works. Yet nothing is guaranteed to work continuously.
Let's look at the famous Elliott Wave theory interpretation. An analyst tells you that price is at X point now, that could be the end of the wave 2 and start of the wave 3. You ask him should I go long or short? He will start explaining: if price reaches A that will confirm reversal, if reaches B it will be continuation. If price reaches C, if it reaches D... etc. Now you insist: what do you suggest? Most common answer would be: it will either go up or down from here. Well, it goes up or down from any God given point! I wonder how good could be a super analyst from a kindergarten boy when it comes to predicting either up or down game? I really hope that should ringing bell in our minds. The only difference between these predictions is that the analyst may have slightly higher winning probability. Pay attention, may have. Now another bold statement: this business is all about high probability trade.
If tossing a coin gives you high probability trade, we will go for it. If hours of calculating endless numbers gives high probability trade, we will go for it. After all price will either go up or down. There are not much options. This is bless. This is curse. If we have to think about, this has to be the starting point.
I will take a break here.
after a year of live trading, reading countless posts, learning from experienced fellow traders came to conclusion to gather all my thoughts and share them with you. Please be advised that these are just personal opinions of a newbie, who is trying to learn something about the essence of trading.
You will not find anything new here. Everything I will say has already been said, stated and discussed in the past in other threads. In this thread I am willing to discuss mainly the philosophy of trading. "What does it has to do with making money?" one might ask. It has nothing to do with making money, yet everything to do with understanding how money is made and lost.
We could trade successfully by using trend lines, support and resistance, candlestick formations and patterns, MA crosses, indicators, etc. But have we thought about why they work? We could be a losing trader, but have we given a thought why they did not work? When you look back to your trade, you will see many reasons why it worked or did not work. We say "aha!" I know what went wrong! Next time I know what to do!
Now stop there for a moment. No, we do not know what to do. Next time is something different and something new. Only thing we know for sure is that we were on the wrong or right side of the trade. Yes, right or wrong side of the trade.
We look at the chart and think price bounced because there was support. When we are always told that price bounces or reverses on support and resistance we automatically detect all these levels that worked. But do we ever look at levels that did not work? What is the probability that they work or do not work? The same is true for candlestick formations and patterns, MA crosses, indicators, etc. What is the lesson to learn.
If we are insistent enough we will go deeper with analysis, spend months, years to align indicators, changing numbers, drawing more lines so that it will look like a total mess. We try to find out magic mathematical formula. Yet, when we see the light at the end, will come across to the same paradigm: it works, but sometimes it does not! This is like zooming in from Universe to atom endlessly but seeing the same things everywhere, the same structures and the same patterns.
What am I trying to say? Allow me to state that in bold: In markets everything works. Yet nothing is guaranteed to work continuously.
Let's look at the famous Elliott Wave theory interpretation. An analyst tells you that price is at X point now, that could be the end of the wave 2 and start of the wave 3. You ask him should I go long or short? He will start explaining: if price reaches A that will confirm reversal, if reaches B it will be continuation. If price reaches C, if it reaches D... etc. Now you insist: what do you suggest? Most common answer would be: it will either go up or down from here. Well, it goes up or down from any God given point! I wonder how good could be a super analyst from a kindergarten boy when it comes to predicting either up or down game? I really hope that should ringing bell in our minds. The only difference between these predictions is that the analyst may have slightly higher winning probability. Pay attention, may have. Now another bold statement: this business is all about high probability trade.
If tossing a coin gives you high probability trade, we will go for it. If hours of calculating endless numbers gives high probability trade, we will go for it. After all price will either go up or down. There are not much options. This is bless. This is curse. If we have to think about, this has to be the starting point.
I will take a break here.
As Above, So Below