The Road to Wealth

Trading without understanding the Rules of Trading is like driving without understanding the Rules of the Road – you will get killed. You also need to learn all about the vehicle, how to drive it and how to judge road conditions: traffic jams, clear roads, pile ups, horrific accidents, road blocks … what will it be?

Imagine that someone comes up to you one day and tells you about a great new game called "The Road to Wealth", very similar to "Driving a Car". After hearing the rules, would you still want to play?

RULES of The Road to Wealth

1. It's exactly like driving a car, but your vision is restricted to seeing only what's next to you or visible in the rear-view mirrors. The windshield is entirely blacked out and the reverse gear doesn't function.

2. You may only accelerate, decelerate, or stop.

3. You can’t see the road ahead, but must not to crash into anything. You won’t know that you are going to crash, until it's too late.

4. As well as invisible obstacles, there are many distractions on the road to contend with. Many purveyors of "driving aids" exist, who constantly entice you with various navigational gadgets which promise to help you get to your destination faster and safer.

5. All the Players must constantly create and apply their own rules. The only rule everyone has in common is Choice: stay out, buy, hold, or sell. How choices are made is entirely different for each Player.

6. Players must learn as many of the "known" rules as possible and adapt them their own playing style.

7. Some rules are never, ever revealed.

So how can you play a game like this and survive? Most people crash and get wiped out, but evidently some people do survive. Some, I’m sure are plain lucky, others have gotten good at reading the backs of the road signs behind them. They recognize that sometimes triangular signs mean danger, sometimes round signs are regulatory and sometimes square signs could mean that there is an intersection ahead. They learn to take the most appropriate action based on the currently available information (e.g. when you hear a crunching sound, don’t accelerate). It’s vitally important when driving under these conditions, to preserve the car, so it can carry you speedily along the straight, open highway, which they inevitable find themselves on. When they recognize they are on a highway, they confidently press on, until the next crunching sound is heard – then to stop immediately to minimize damage.

This is a most ridiculous way to get to a destination and only madmen would even consider it, so why do we do it? Well, because we are madmen, but also because we believe that the destination is worth the almost unbearable driving conditions. We are on the Road to Wealth!

The Market is not an abstract, autonomous entity, but a group of people making choices based on information made available to them. It’s just a giant Information Processor. The information comes in many forms and from many sources (news, rumours, gossip, analysis, charts, inside knowledge), but ultimately, the Market is just people reacting to information.

Phrases like “there are more buyers than sellers” are misleading. There is only supply and demand. If traders want to buy a particular instrument because their methods have indicated that the price could rise, they will pay a premium, causing the price to rise, because the buyers are willing to pay more and more (and the sellers are asking more and more). The number of sellers or buyers is completely irrelevant.

Most amazingly, there are always two parties that participate in each transaction. If there weren't, there would be no trade. Both parties therefore appear to believe the exact opposites, but this is not always the case. There could be other factors involved in a selling decision, e.g. needing the cash, taking profits for the sake of taking profits, taking a loss to write it of against taxes, fear, pain. There is also a certain element of randomness in buying – buying for fun, greed, testing a new system, etc. There are also the Market Makers.

Happy Trading!
BullsEye
~~ Tossing the Three Sided Coin ~~