Tag: Market Wizards

“I should only take 100% certain signals”

Posted on by Anatoliy Schneider

I should only take 100% certain signals – the ones that I know will not fail me

This one is tricky. It seems that it makes good sense. Shouldn’t we all analyze the market properly and find the best possible trading opportunities? Why should we even bother taking the trades that we are not certain about?

So how do you feel, think and act when you believe this?

  1. Reluctant – “This signal does not look quite certain yet…”
  2. Frustrated – “I’ve been analyzing the market for hours now, but no trades look certain enough yet!”
  3. Reckless – “Now that I found this 100% certain signal, I can scale up my position and I don’t really need Stop Loss either – this trade can’t fail!”
  4. Worried – “Well, this trade does not behave quite as I expected, but I am sure it is just a temporal correction.”
  5. Hopeful – “I should just double my bet while Market gives me better price…”
  6. Afraid – “This does not look good so far, I don’t have much margin left…”
  7. Numb – [just stares at the screen…]
  8. Horrified – “It’s all #u?king gone! My whole account!”

The above example might be over-dramatized but it shows what can result from your inability to accept uncertainty.

You certainly get a lot of excitement trading that way, and I guess for some traders gamblers excitement is a goal in itself.

Let’s consider the opposite belief:

I should take any signal my trading system offers, knowing that none of them is certain

How do you feel when you believe in the above statement?

  1. Calm – “I am just doing my job, taking each opportunity I find”
  2. Quiet – “Every trade feels completely the same inside”
  3. Composed – “I know exactly what I am doing”
  4. Safe – “My account is always protected when I trade like this”
  5. Optimistic – “I am looking forward to positive long term results of my trading regimen”

Not much excitement, nor fun. Reminds me of one of my favorite quotes from “Market Wizards” in interview with Larry Hite:

“Larry, how can you trade the way you do; isn’t it boring?” I told him, “I don’t trade for excitement; I trade to win.” It may be very dull, but it is also very lucrative.

If you are excited about your trades, you are doing it wrong. If excitement is what you want, just go to Las Vegas – at least you get free drinks as you lose your money.

“I cannot accept uncertainty”

Posted on by Anatoliy Schneider

I cannot accept uncertainty

Imagine how difficult it must be trading with such belief. In our daily lives we constantly strive for certainty, we want the outcome to always be expected, and yet there is just too much we can’t account for.

How do you behave and feel when you try trading with this belief?

  1. Afraid – The Market can take my money at any given moment!
  2. Helpless – Anything can happen and I have no control!
  3. Restless – How can I be at peace when I have no control over my trading even a minute from now?
  4. Frustrated – All my work is for nothing, because no matter what I do, I am not certain of any single trade!
  5. Miserable – I try so hard, but all I get is more frustration each day!
  6. Lost – There are no trading opportunities I can see! Any trade I consider might lose!
  7. Panicking – I just placed a trade and the Market already behaves not the way I expected!
  8. Embarrassed – All I do is making a fool of myself, I always buy at tops and sell at bottoms!
  9. Withdrawn/Apathetic – I don’t even want to look at the Market, there is no doubt it will just go against me yet again…
  10. Tired – The more I analyze, the worse results I get, my efforts – all for nothing…

Well, I don’t want to go to “Suicidal”, but it is true that our beliefs can push us into dark corners of our minds indeed.

Why are we doing this to ourselves? Why do we need to be certain of the future, when we know for a fact that it’s impossible? If you need to be certain, be certain of this:

I have no idea how the Market will look a second, a minute, an hour, a day or a year from now!

So how do you trade, when nothing is certain? Just like Bruce Kovner said in “Market Wizards”:

…making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.

Let’s see if your thinking changes when you consider just the opposite of the belief we started with:

I completely accept uncertainty on the market. I have no idea where the price will go.

How do you feel now?

  1. Liberated – How great it is not having to know!
  2. Concentrated – Now that I know what I don’t know, I can concentrate on my analysis better, without having to be right.
  3. Confident – Actually, now I know exactly what the outcome of my trade will be – uncertain!
  4. Relaxed – My job is to explore the opportunities, Market’s job is to show me if they work or not. I simply concentrate on my business and let the Market do its own.
  5. Amused – Each single step the Market makes is always a pleasant surprise for me – it simply teaches me and shows me where it goes.
  6. Fascinated – It is amazing how balanced, harmonious the Market is, if I but let it go!

You can have the best trading system in the world, only to be ruined by your own thinking.

True, you might not become profitable even when your beliefs are in harmony with the nature of the Market, but you will become the greatest learner, watching and following the greatest teacher there is in trading.