THE TRADING EDGE
Thursday, July 31st, 2008Most of us, when we are “newbie’s”, have the perception that trading is easy, or at least it is not rocket science. We think that we can acquire a certain basic knowledge, both fundamental and technical, then find a methodology and start trading. Most of us quickly get a rude awakening when we find that our account does not grow as we had expected it to. Interesting enough, in our search for the reason for our failure, we choose not to revisit the total experience noted above, but to focus on the methodology with which we had selected to trade. Why? I am not really sure. Perhaps it is because our newly gained fundamental and technical knowledge is learned and the methodology is generally acquired from some outside source. A trading system, if you will.
Most traders, including myself, at one time or another spend a great deal of time and energy trying to resolve the initial trading failures by looking for a system. The idea is that if we can just find a system that works, that fits our newly discovered style of trading, we will be successful. We quest for that Holy Grail.
I submit to you this thesis, that the most significant problem the new forex trader faces is getting over the idea that a trading system is a necessary ingredient to successful trading. If you were to “Google” the words “Forex Trading Systems”, you would receive approximately 1,400,000 hits. That should give you an idea of how many individual trading systems might be out there. Most of these systems were developed by traders, some who are very successful traders, and some who are unable to trade, however are great salesmen. Some of these systems work, some don’t.
Some will work under certain market conditions, then when conditions change, no longer work. Some work for the developer because he or she just happens to be an expert trader and could make any system work, but is unable to incorporate that internal expertise into the system. Finding a trading system is a huge, daunting undertaking, and after a number of years going down this path, I have concluded that this is the wrong approach. I think that the correct approach is to learn how to trade. Sounds very glib, doesn’t it? But if you know how to trade, if you understand the market, if you understand how price moves and what causes it to move, then YOU CAN MAKE ANY SYSTEM WORK.
I have been fortunate over the years to become acquainted with a number of very fine, professional traders. Some are authors, some are teachers, and some are fund managers. Many of their names are well known. What is important is that they all have certain common characteristics. I will not go into detail on this; there are some very fine books written about some of these people. But briefly it comes down to this:
You can read the whole article at this link:
http://www.forexmentor.com/forex-trading-articles/the-trading-edge.html
