The key to learning how to trade - Understanding what to focus on

A man with no prior experience at all went on a skydiving trip. He had seen it done before on video, and on TV, and it sounded easy enough. He went on the plane and jumped from it without a parachute because he only knew what he saw - people floating around in the air. He broke his legs as a result and thereafter condemned the sport as one of the most dangerous sports in the world, and that people who skydive are no better than brainless morons who deserve to die.

A boy, who just got his driver's license for around 2 months, starts feeling more confident behind the wheel. He sees other cars on the road speeding and thinks that all the warnings from his driving instructor, his parents, the authorities and others are meant for the "slower" drivers, those who cannot keep up with younger, faster learners like him. He starts driving faster and faster, gets into an accident, and is paralysed. He blames this on his parents for not getting a "safer" car. (Translate : a more expensive one). Because if he was driving a better car, he would not have gotten into an accident, and he still thinks his parents are stupid because they never warned him enough about the dangers of speeding.

Do these scenarios above sound ridiculous to you? They sure sound ridiculous to me. Now let's take a look at the following scenario.

A man, has heard about how bigshot traders are making tons of money trading financial products in the market. He has no experience whatsoever, and has heard that there are alot of losers as well. However, he thinks that "If they can do it, so can I". He signs up for a class with some Guru which he found off the internet. After a 3 day session and armed with some new knowledge, he jumps straight into the market. Can you guess what happened? He loses all his deposited money. Of course he blames this on the "Guru" and that he lost money because the strategies taught by the "Guru" do not work. He has conveniently forgotten all the Guru's warnings of managing his trade sizes and that "a 3 day session is just so that you can learn the basics of what trading is all about"

He goes looking for another Guru to learn other strategies, which he believes will allow him to be better equipped. 6 months later, he has some minor successes in the markets and thinks he is ready for the big time. He takes out a large portion of his savings and puts it all into his trading account. He starts feeling more confident with each successful trade he makes. He sees other people trading with bigger sizes and making alot of money and thinks he can do the same. He believes that alot of "standard" rules or warnings given by his teachers, his coaches are meant more for those who are not as smart as him, and that he is smarter than the average person. He starts trading bigger, and bigger, and crashes. He loses ALL his money, save for a few hundred dollars left in the account. He finally "admits" to himself that the market has been a con job all along, and that people who put money into the financial markets are brainless morons who deserve to lose all their money.

Trading is both an art and a science. Quoting the words of Dr Alexander Elder, it is a science in that almost everyone has access to the same tools, data and news, and it is an art in that each and everyone interprets and uses these tools differently and achieves different results. IT IS NOT EASY, IT IS SIMPLE, BUT NOT EASY.

Trust me, I have seen so many who are convinced that they know something about trading, and see these same people crash and burn. Some of them are even talented in my opinion, but lack the understanding that it is not just about knowing strategies, it is about a lot more than that. It is about knowing yourself and having the ability to make decisions, and knowing when you are wrong, AND BEING ABLE TO ACT. For some people it may take longer to realise this and be able to take advantage of this simple fact, for some people it may come quicker. If you understand this then you know that learning how to trade is a matter of longevity in the game - the longer you can survive in the game, the higher your chances of learning that single thing that might make all the difference.

In the 2 scenarios above, the lesson we can understand is;

 No 1, understanding what you are getting yourself into - IF YOU DO NOT EVEN UNDERSTAND WHAT YOU ARE DOING, HOW IN THE WORLD ARE YOU GOING TO DO IT WELL? Let me help you with this statement. If you have been dabbling in trading, whether its stocks, FX, futures or other instruments, do you know what it is you are trading, as in the product that you are actually buying or selling? If the answer is NO, you have already lost the battle before its begun, no matter what anyone or the internet tells you. I mean it.

No 2, YOU, and you alone are the one responsible for your trades, your successful ones, and your failures. No matter who tells you to buy or sell, no matter what strategy's rules you are following, no matter what the guy who sold you the robot told you about how much money you can make, or no matter which book you are reading on "Learning how to trade" says, YOU are the one who clicks the button, and you are the one who makes the decision. Never, ever, ever, blame anyone else, not even the scammers out there. If you had done your research and are not lazy, you will not fall into their traps!!

Given all this nonsense, I have recently started sharing with some people who asked me how I trade. If anything, all I have to do is to throw everything I have at them, and people eventually pick up what is useful for themselves and discard the rest.