Target: Traders

Who is Really "In Control"?

2009-11-02T11:12:00.000-08:00

When reading about trading, we often hear the terms "the Bears are in control", or "the Sellers are in control", etc.

However, if you think about it a bit, you can arrive at only one accurate description of who is actually in control: it's always the buyers. The buyers determine what price they will pay for the instruments being traded. The buyers determine what price they won't pay, too.

A more accurate description of a situation would be: "The Buyers are bullish today", or the "Buyers were bearish yesterday".

The Sellers are never in control...

Happy Trading
BullsEye

The Road to Wealth

2009-05-30T12:18:00.000-07:00

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 ~~

More Trading Analogies

2008-10-31T09:15:00.000-07:00

1. Trading is like fishing: You sit, watch, wait, then strike. For six years I thought of it this way. Today, I realized ... I am the fish.

2. Trading is like driving a car with the windshield covered up. You must anticipate the road ahead by looking only in the rear-view mirrors. Sometimes, just to keep the ride interesting, the steering wheel breaks. And the accelerator gets stuck.

3. Trading is like tossing a three sided coin. Up, down, flat: take your pick.

Part 3 - What are the Odds of Trading Success?

2008-08-23T12:37:00.001-07:00

Pretty bleak by the look of it...

I recently created a thread at a trading forum dealing with the question of where the much-quoted trading failure/success rates originated and where the supporting evidence might be located. You can read the discussion here:

98% of Traders Fail? Says Who...?

From the discussion and my own research, I think I can safely conclude that:

1. Any statement similar to "XX% of traders fail" is generally unsubstantiated bulls**t and can be safely ignored.

2. The few studies that *do* exist are typically small and quite specific in their samples and methods. They should *not* be used to interpolate or infer any general statistics about the success rates of traders.

3. If you are looking for a way to predict your chances of success by means of some official statistic, you will not find it. No study can possibly give you that information, because it would have to be specifically tailored to a large enough group of people in exactly the same (or at least very similar) circumstances as you - an obviously nearly impossible undertaking.

Happy Trading!
BullsEye
~ Tossing the Three Sided Coin ~

Part 2 - Trading Analogies

2008-08-18T14:56:00.001-07:00

These videos will give you a really good idea of what trading is like. Yep, they will. Believe it. Warning - some scenes may be disturbing to sensitive viewers:

Bull Markets
Give you a run for your money...

Bear Markets
Take the shirt off your back...

You may even survive, if unafraid...

Happy Trading!
BullsEye
~ Tossing the Three Sided Coin ~

Part I - The Awakening

2008-08-10T13:34:00.001-07:00

At last, you have some money set aside. You are ready to pursue your lifetime dream of creating wealth (without too much hard work) and of achieving happiness, free from financial worries.

Financial freedom! No more bosses! No more mounting bills! No more debts! You are going to Trade your way into the upper echelons of society. Stocks, Options, FOREX!

All you need to do now, is buy some books. Buy a course. Buy a program. Learn about going Long and Short, Puts, Calls, Points, Pips, Candles, EMAs, Bollinger Bands, RSI, MACD, Support & Resistance. Write a Trading Plan. Plan your Trade, Trade your Plan. Buy Low, Sell High. Buy high, Sell Higher. Buy and Hold. Buy a black box Trading System - hey, just "buy" if the lights are green, "sell" if the arrows are red. The guy on TV said it's easy - he made $15k in a day! Even better - buy an Automatic Trading System and let it trade, instead of you. Hell, write an automatic trading system - why not? Get a broker. Open an account. Paper trade. Live trade. Buy more books, more software and more indicators. Buy more courses. Design your own trading system and hey, why not - automate it! Join user groups, trading support groups, discussion forums and chat rooms. Subscribe to trading newsletters, news feeds, charting websites - delayed & real time. Read blogs, watch videos. Aha! - free Charting & Trading software! Wow, those guys are amazing! How kind of them! Hey - look - even a Trading Competition - let's enter it! Tweak, test, back test, forward test, retest. Analyze, theorize, hypothesize.

Each new item, each new tiny flake of uncovered knowledge promises to lead you closer to snaring that elusive dream, but somehow ... the dream always flits away before you, faster than the countless tools at your disposal for snagging it. Must be something you're doing wrong! More research. Wait, what's this? - Trading Psychology - volumes written about it, wow - I knew it - it's all my fault - you press on, delving deeper and deeper into the mysteries of the Markets and the Human Mind. Visualize, minimize, memorize, harmonize, diet, exercise and dehumanize. Pray, chant and incant. Psycho-cyberneticize.

Some tough years later, your money runs out, shortly after you make this shocking discovery:

The Markets are Random and Unpredictable!

With time and experience, you started to realize: Hey, wait a minute - these famous traders who claim to have amassed untold wealth have never actually presented any evidence to support their claims. Hey, wait another minute - these peddlers of books, training programs and automatic trading systems somehow convinced you that it's not their systems, not their information that's faulty - it's really your unresolved personal issues and lack of discipline causing their wonderful systems and training to fail!

What happened? You bloody idiot! You incompetent nincompoop! You LOOOOSEEEER! How could you do this?! All that hard work. All those days, week, months - nay, years - of study and work. All those nights of poring over charts, books, manuals, programming code, videos, web sites, newsletters, magazines, getting ever closer to the secret! All that MONEY!

What did you do wrong? Not much - in fact, just one thing:

You became a target. A target for the vast army of thousands upon thousands of marketers, advertisers, dealers, brokers, webmeisters, trainers, teachers, mentors, gurus, columnists, writers, authors, legendary traders, "wizards", experts, media moguls, pundits, prognosticators, analysts, talking heads, chart providers, software developers, bankers, financial advisers and prophets, all with just one thing on their agenda - parting you with your money.

Don't feel bad. There are multitudes just like you.

Have you ever met anyone who irrefutably demonstrated a "winning strategy", backed by hard evidence (e.g. a certified brokerage statement of their trading account)? No.

Have you ever met anyone who retired by trading? No.

Have you ever met anyone who knows someone, who knows someone, who has? Yes.

Believe this: The only person (other than you) who wants you to make money trading, is your spouse. Everyone else wants to take it away from you, with their:

Brokerage fees

Margin calls

Commissions

Spreads

Interest

Trading rules

Withdrawal fees

Money transfer fees

Currency conversion fees

Taxes

Maintenance fees

Upgrade fees

Subscription fees

Membership fees

Data feed fees

Mentoring fees (isn't "mentoring" supposed to be free?)

Training fees

Consulting fees

Conference fees

Want to be a Trader? Beware - you are setting yourself up to be a Target instead! Sure, a lot of people are making money from trading - but are they Traders?

In fact, trading is nothing more than gambling, despite all the clamour and noise to the contrary. Some people possibly do make lots of money trading - just as other people might make lots of money gambling. All it means is that they got lucky. That's all it means.

Every trading system works some of the time - even random selection. Yes, you too could get really lucky and apply the right system at the right time and get out with your winnings before they become losses, but ... if you don't ... don't be surprised. More importantly, don't be hard on yourself, either. After all, you were only tossing a coin (and, to boot, one that has more than two sides)!

Good Luck. You'll need it.

Happy trading!
BullsEye
~ Tossing the Three Sided Coin ~