September 10th 2010 Commentary

Think about how it seems the the market always knows your own individual breaking point in terms of hitting your stop. Regardless of where you enter, it will often push just far enough to take you out before the trade works. This is not random. It is by design. It is the result of thousands of players running millions of strategies built exclusively to take your money.

Most traders early in their career and some well into their career think the goal is to outwit the fastest computers in the market by having the right stop or break even mechanism.

My opinion is that fixed strategies are virtually useless. The machines that the players use to make markets take all this into account in their algorithms and randomize the patterns at which they hit your bids and offers.

This is much like how data is encrypted. You may be able to crack the strategy if given enough time but next time it will be different.

This makes any system being sold by the cowards who consistently fill our inboxes completely useless.

Even when you have a method or just plain gut feel to precisely identify the areas that will hold, fail, continue, or extend, you must still time the trade properly and have the ability to successfully exit with a profit.

Since your edge and odds of success is dynamic and randomizing as the trade evolves, a single policy on how to handle each trade is unlikely to produce a positive result in a sample that is repeatable and without randomness. Thus, profitability on demand can not be obtained this way.

Understanding the structure and movement is just the beginning. After that, what will determine if you are profitable or not will be your ability to stand up against the other players you are competing with. No method or strategy can accomplish that.

This is a skill that is learned and refined by doing much like how a welder perfects the strength of their welds over time.

I have found that very often, the opposite of what I initially think is the proper trade. This is not a matter of simply fading myself. It is a matter of reading my initial emotion and psychology, considering what is causing those feelings, then questioning if whether the other players are actively trying to elicit those feelings.

Then I get bearing on my situation and the proper decision can be made based off my cumulative training and experience. It is usually a process of decided an action is dangerous, considering the oppose, then engaging the initial action that I felt should be avoided.

This can not be repeated through a static process. I consider the static side of trading to the the whole left side of the chart. This is where virtually all traders play their game.

The correct (wholesale) side of trading lies on the dynamic right side of the chart. This is where the few that take all the money play their game.