Financial Markets Experience EP7

Stage Four of the journey to become a Master Trader: The Squiggle Trader Stage You'll move into the "squiggle trader" phase if you don't quit. Since you failed with patterns and so on, you figure there's some "secret weapon," a "holy grail" known only to a select few, something that will help you filter out all those bad trades. Once you find this magical key, your profits will explode, and you'll achieve every dream you've ever had. You begin an obsessive study of every method and indicator that is new to you. You buy every book, attend every course, sign up for every newsletter and advisory service, and register for every trading website and every chat room. You buy more elaborate software. You buy off-the-shelf systems. You spend whatever it takes to buy success. Unfortunately, you stack so much onto your charts that you become paralyzed. With so many inputs, you can't decide, particularly since they rarely agree. So you focus on those which agree with the direction of the trade you've taken (or, if you're the fearful sort, you look only for those which will prove to you how much of a loser you think you are). This is all characteristic of scared money. Without a genuine acceptance of loss and the risks involved in trading, you flit around like a butterfly in search of anything or anybody who will tell you that you know what you're doing. This serves two purposes: (1) it transfers to others the responsibility for the trade and (2) it shakes you out of trades as your indicators conflict. The MACD says buy, and the stochastic says sell. The ADX says the market is trending, and the OBV says it's overbought. By the end of the day, your brain is jelly. This process can be useful if the trader learns what is popular, i.e., what other traders are doing, and, if he lasts, how to trade traps and panic/euphoria. And even though he may decide that much of it is crap, he will, if he doesn't slip back into the Cynical Skepticism Stage, have a more profound appreciation - achieved through personal experience - of what is sensible and logical and what is nonsense. He might also learn more about the kind of trader he is, what "style" suits him best, and learn to distinguish between desirable and practical. But the vast majority of traders never leave this stage. They spend their "careers" searching for the answer. Even though they may eventually achieve piddling profits (if they don't, they will no longer be trading), they never become truly successful, which has insidious consequences.