Are Traders Dumber Than The Average Human Being? Part -II

In Continuation with previous post

Screen-time won’t help you

You will often read that traders have collected so much screen-time over the years that success has to be around the corner. Think of it this way: You have probably watched hundreds of top movies and TV-Series, but you are neither a professional director nor a skilled actor just by staring at your TV.

What really makes the difference in a trader’s performance is the effort he makes to analyze past trades and performance, plan his trades in advance and tries to find ways to build his edge.

Ignorant, narrow-minded and indicator-cursing

Traders are super ignorant and when it comes to indicators, traders found their public enemy number 1. Traders see indicators as inferior and lagging, while praise price action as the magic bullet without ever thinking about what they actually are.

Yes, indicators are based on calculations of past price, but what is a candle or price pattern? Anything that is left from current price is history and shows the past which makes candle patterns or price formations lagging as well.

However, this ignorant behavior just serves as a metaphor for the general narrow-minded approach traders bring to the table, or their trading charts. It doesn’t matter whether you trade price action, candle formations, indicators or trade purely fundamental – money can be made many ways. But walking around like an ignorant jerk is a sign of a pure amateur trader.

Algo Trading is not the reason you lose money

In the last few years, traders found a new scapegoat to blame when their trading suffers: Algo trading. Their rationale is that Algo are creating irrational markets, ‘weird’ price behavior and make it harder to trade profitably. But what’s the deal with Algo trading?

Throughout history, traders were scared that new technology will ‘kill’ the trading business and rob them of the opportunity to make money trading. It was the same when wealthy investors could buy their own stock ticker machine, the telephone enabled faster execution, the computer was invented and changed everything and when the internet started and privileged traders could execute their trades almost instantaneously. Algo is nothing but the next step and a technological advancement. If you are consistently losing money, we guarantee, it’s not the fault of Algo trading.

Trading means constantly adapting to changing market developments. If you stand still, you’ll be run over.

Cutting losing trades when they come back to 0

Research shows that traders cut winners, while hold losing trades – the opposite what common sense would tell you what to do. But to top it all off, many traders will hold losing trades and exit the trade as soon as it comes back to their entry. If you see yourself managing your trades this way, you are not trading anymore, but hoping and gambling!