[B]Why human nature works against profits[/B]
I wanted to leave a bit of trading wisdom from legendary trader Jesse Livermore.
[I]“The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Of all the speculative blunders there are few greater than trying to average a losing game. Always sell what shows you a loss and keep what shows you a profit.”[/I]
Human nature works against you as a trader, and works against your ability to make money in the market. Worst of that nature is a persons desire to keep losing trades open but cutting winning trades short. This is done because of hope and greed. They keep their losers open out of hope that the market will turn in their favor, and they cut their winners short out of greed, because they don’t want to market taking back their couple percent winnings. If you let your losers run and cut your winners short, the best you can hope for is a break even or slightly better than break even profit record. This is why I am a proponent of learning what price action really is, and using that to get the most out of your trades.
[B]Why most guru price action courses don’t work[/B]
Countless PA teaching websites make it seem like 3 or 4 candlestick setups is price action. To the contrary, everything price does is price action. Learning a handful of candlestick setups can help you get in the market, but you will have a hard time making “significant” profits if that’s the only thing you know or understand about the markets. I have personally done this many times and I know many of the readers here would agree that they have gotten out of trades at a set profit level, just to watch price continue to move and you missed out on 1-2 times profit you could have made by staying in. Obviously every trade isn’t like this, but imagine if you could do this in just 1 out of every 10 trades. That extra 10-20% every dozen trades really starts to add up.
I think a great disservice is being done with the easy price action teaching that is prominent. I would have to seriously question if anyone is making gains in the long term, using simple horizontal levels and 2-3 price action candle setups. That is similar to taking a checkers strategy and applying it to a game of chess. It reminds me of the sales pitches you see on infomercials where they sell a bottle of magical goo that can take scratches out of your car. We all know it takes a 2000$ job done by an auto body shop to fix a car, not a 20$ bottle of magic goo. I take to my hat off to those teachers out their that are honest about the markets and discussing the advanced market dynamics. If I wanted to, I could tell people that trading is simple and can be done successfully with a horizontal line a couple of candle setups, but that would simply be deceptive. Trading is dynamic, difficult and at times emotionally draining. Instead of hiding those facts so I can sell memberships, I want to say lets be honest about the markets up front and then spend our time mastering it! It’s very disheartening see unformed newbies laying down hundreds of dollars for a simple, easy and clean magical trading method, just to find out it doesn’t actually work because the real life markets aren’t simple, easy and clear. My approach may not make you feel warm and fuzzy, but I don’t want to make you feel cozy about the market, I want you to make money and if possible “serious money”.
I have been extremely happy to see people here stretching their wings and trying out some of these different trading methods and techniques. It’s not just that though, I can tell some people here are really starting to “get it”. They are going from a 1-2-3 step method, to actually understanding the fluidity of the market and adjusting their trades to the current market conditions. Learning a step by step method isn’t bad, but it is a handicapped approach to the market and will keep you from really mastering the market. I have been extremely surprised by the number of people who have said they never heard of some of the topics I have mentioned. These are people who have been following the mainstream gurus for a couple months to a couple years. This tells me there is a huge gap in what is being sold and what is reality. I have a big job ahead of me, but I am enjoying this journey and I look forward to continue surgically analyzing every aspect of the markets and mastering them.
sounds good…
