In Trading Routine and Psychology

As 2010 comes to a close and I dig around for any possible way to summarize yet another tumultuous year, I am reminded of the origins of this site and the premise on which it all began. Some people might be attracted to the title of simplicity while others the connection to their particular trading methodology, though I find it of great importance to take the blog back to its roots and discuss not only it’s premise but a precursor of all of our trading routines.

If someone asked my opinion on how to become a successful trader and my response was limited to no more than one sentence this “slogan” for nobrainertrades.com would no doubt be my only words spoken:

“Take The Easy Ones, And Don’t Do Anything Stupid In The Meantime”

Uncertainty Unschmertainty

I have said on many occasions that uncertainty is a very normal and routine part of trading, though it is far from the underlier in our investment decisions. The number of uncertain circumstances that arise throughout my or any other trader’s day far outweigh those that pose a high level of conviction. These moments of clarity are rare, and they tend to occur when we are the most alert, most prepared and most conscious to events happening before us. Relying on others for forecasts, a burning desire to get into the market or other forms of pure laziness throw Miracle Grow on our uncertainty and tend to make it much worse before it gets better.

Bear in mind three simple things as you go about your trading routine:

  • The more time you spend in front of your monitors, the more opportunity you will find, though the less alert you are likely to be
  • The more opportunity you find, the more risk you assume
  • The more risk you assume, the greater profits you can obtain or conversely, the more losses

Highly uncertain times should be left aside for those that are not. Taking action during these times is by all definition the “stupid” in our slogan “Take the easy ones, and don’t do anything stupid in the meantime”.

Overtrading is so popular that it can easily throw those that do it into a statistic in a matter of seconds. Traders that control it and only take action when the correct opportunity presents itself are the ones that tend to prosper over time.

Certainty

Why do we argue over certainty? Most of the time, it is because we are too anxious to trade or have a simple lack of understanding about the market in which we are participating. This lack of understanding usually roots from much needed experience or lack of awareness due to ignorance in understanding inputs, interpreting the news, drivers or other forms of market moving activity injected into the market.

Moments of clarity are sometimes dropped into our lap like a nicely wrapped birthday present we

weren’t expecting. We can see it and understand it all, and action is taken. We have a successful trade, yet all we might be doing is making up for all or a portion of previous losses. Now imagine having nothing but successful trades, or a string of these birthday presents plopped onto your lap on a regular basis. You are simply removing the ugly patch from your routine. You are opting certainty over uncertainty.

….and we all have this moment. Even in the very early stages of my career I was very much aware of moments that posed a much higher level of probable success over others. Even with my limited understanding I knew where I stood a much better chance of a positive outcome, and this never changes. No matter how much experience you gain I am confident that the existence of this “feeling” will always remain true. It is a matter of harnessing these moments and ignoring all of the others.

If pressing buttons is what gets you excited, then there are more than enough objective websites out there to help you fill any knowledge gaps and enhance the frequency in your levels of certainty. Something as common and simple as Wikipedia can leave you with questions answered and light bulbs going off, which might lead you on to other topics relevant to your trading.

Churn Monkey Disease

People often say things like “you are too hard on yourself”. In the case of overtrading, I find nothing wrong with being hard on yourself. This is the ultimate mistake and it should be number one on anyone’s “fix list” (if the problem exists).

Brokers make their money off of your transactions.It is simply their job to get you to trade more.

In order to do this, they will flood you with a plethora of research written by non-street savvy “analysts” aka churn monkeys, ease-of-entry technology (you can even trade on your mobile phone very easily now), charting software that mimics the floor of a casino with all of the indicators available (more indicators = more “opportunity” = more transactions and more money), trading signals that probably originate from a former fast food employee’s shack in Antarctica, and forums that have you throwing ideas around with other like minds susceptible to this information.

All of the above have one root purpose (and usually cause): to trade more often. To fall back on a cliché: ignorance is bliss, in this sense. There is only so much information out there that is digestible, and you want to take advantage of something that you alone can interpret, and in your own comfortable manner.

My Grandmother Was A Better Quiltmaker

My grandmother was among the pack that made quilts in her later years, and they were all different. She brought in all types of unique items, colors and even shapes when it came to their design. To some people, they might have been considered an eyesore, but to her, they were all hers….nobody else could claim them. She loved every part of them because all of those little stitchings meant something unique to her and her alone. And what would start as a simple patch on the quilt would eventually turn into something much larger, until finally, the project was complete and another one was added to the collection.

While I don’t expect you to put down the mouse and pick up a ball of yarn and needles, the simple construction of the quilts my grandmother used to make or any other item created across the world on a daily basis starts with the idea of an individual. This creative process is something that gets heavily overlooked by many traders as the need to carbon copy the actions of another is an overriding theme in this industry. A strategy is usually delivered on what might appear to be a silver platter, only for the trader to later find out that it is old, rusted and falling apart.

Reading a biography of a prolific individual might be fascinating or fun, but no single person will ever be like the original. Creativity is one of the parts I enjoy the most about trading. If it wasn’t there, I or many other people probably wouldn't be doing this for a living. The “strategy” we use here is based on consistent global variables that do indeed require a degree of input and creativity to act upon. Most of us do it without even realizing it. It is a shell, or a starting point, with infinite possibilities in terms of interpretation and direction.

Once upon a time I used to post trades here, emphasizing that they are used only to demonstrate that the methods used here work, and do so effectively. But as the site continued to grow and pick up more readers, I also picked up a group of traders that mistook me as their personal advisor as opposed to just a writer. Out of frustration from a string of private messages and careless emails received I simply stopped doing it and began to focus more on interpretation and actual digestion of this information as opposed to raw examples. Over time, I notice the emails have changed substantially. Instead of “what do I do now?” I receive questions such as “can you recommend more professional resource sites?”, which I of course prefer much more because I know that the person sending it is putting in time and effort into their routine. The effort is there and creativity is clearly being sought.

As 2010 Nears Its End…

….be mindful of everything you have learned this year. We take our experience for granted sometimes and ideas that might seem to come in a flash can actually be the most valuable. Bits of information are simply everywhere….be hungry and keep digesting them. We should never sit in dormancy, waiting for a “golden key” to get handed to us. The “golden key” is not something we can find or receive as a gift. We have to create it.

And of course, one more thing:

Take the easy ones, and don’t do anything stupid in the meantime.

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Comments
  • Robert
    Reply

    Hi Steve,

    I just finished reading this post (again). After several months of trying to earn my 5% daily, and yes, I made lots of plans of what I was going to do with it! (he-he) I’m tired of getting beat up and looking to learn from you. I’ve been to dozens of FX sites and yours is the only one I have found that is not a joke. You are like an adult offering help and an example to follow for us kids out here trying to navigate the transition to adulthood.
    I’m still a bit puzzled regarding why you invest the time that you do into this site. I thought the age of decency was over? Maybe you do what you do for the same reasons that ‘Tyler Durden’ does what they do?
    Whatever your motivations, thank you. It’s a great thing that you offer a place for people who want to learn currency trading to do so free of B.S.
    Most will walk away because it actually involves pretty intense effort but it is a good thing that you at least make it available.
    Thank you.

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