| At some point, if they last long enough, all | | | | a fund that we could all invest in. That way |
| traders discover that successful trading is | | | | the vendor can ensure that we all receive the |
| not the inevitable result of a good trading | | | | full potential of his system without any |
| strategy or system. If all we needed was a | | | | effort on our part, without us having to |
| good system or indicator we would all be | | | | overcome the bigger challenge of implementing |
| successful traders. Yet clearly we are not, | | | | the system ourselves. |
| far from it, there are very few traders | | | | |
| making their living consistently from the | | | | Presumably for every client who learns the |
| markets. | | | | system only a few manage to implement it |
| | | | successfully, with the fund option every |
| Technical analysis is a vast and well | | | | client gets the full benefit of the system; |
| researched subject. Many minds have poured | | | | so why not start a fund, a much better way to |
| their heart and soul into searching for the | | | | share the fruits of his good fortune. The |
| holy grail of trading: the system, strategy | | | | other question that is frequently asked is |
| or indicator that will yield to them | | | | why doesn't the vendor display the full |
| unlimited wealth and glory. Yet with all this | | | | results of trading the system? Instead we get |
| depth of knowledge readily available, trading | | | | comments like '97points this morning, thanks |
| profits remain as elusive as ever. If we were | | | | a $ grand!' from a satisfied punter. In order |
| to take a scientific approach to evaluating | | | | to evaluate the effectiveness of any system |
| technical analysis we would have to conclude | | | | we need to be able to see the results of |
| that it is of limited value. | | | | every trade, over a significant period of |
| | | | time, so we can compute the necessary |
| System vendors though, will continue to | | | | statistics. |
| exploit our desire to believe that there | | | | |
| really is some secret knowledge that will | | | | To develop these skills we need to get our |
| enable us to transform into super traders as | | | | feet dirty, plunge into the markets and have |
| soon as we expose ourselves to their secrets. | | | | experiences. These experiences are all good; |
| It is a very tempting fable to believe in, it | | | | they are the feedback we need to gauge our |
| offers an answer to our prayers and our | | | | current state of development. |
| problems, it engages our ego (how great to | | | | |
| conquer the markets and escape the drudgery | | | | Without feedback we have no means of |
| of work etc.) and it allows us, briefly, to | | | | progressing. When I first started to play |
| relinquish the painful self-doubt that we are | | | | tennis I did not go straight into a |
| unconsciously fighting. | | | | competitive game and try to win, I started by |
| | | | learning the basic skills of tennis, the |
| The system vendors flatter and deceive us in | | | | forehand, the backhand and the serve. As a |
| the same way that street sellers sell | | | | novice it was normal, expected even, for me |
| exclusive, stolen perfume, which is usually | | | | to hit the ball repeatedly in the net or hit |
| no more than bottled water. We are easily | | | | it sailing out; this just indicated that I |
| deceived when we are told exactly what we | | | | needed to work on these shots. Imagine taking |
| want to hear. | | | | this approach to trading. |
| | | | |
| Let us pretend that a system vendor really | | | | Lots of losing trades is to be expected for |
| has a system that works as they claim. Let us | | | | the novice trader, it is the first feedback, |
| also assume that his cup truly does 'runneth | | | | which reinforces the fact that the first |
| over' and he sincerely wishes to share his | | | | skill of trading is to cut losses short. A |
| knowledge as a way of repaying his good | | | | novice tennis player needs to learn to |
| fortune; and finally let us assume that he | | | | control the ball so that it lands in the |
| charges a fee, not for his own gain, but to | | | | court; the novice trader needs to learn to |
| ensure that his clients really take him | | | | control his losses. This is how we learn; it |
| seriously. Assuming all this, does it make | | | | is a constant cycle of trade -- feedback -- |
| sense to make his knowledge available in a | | | | adjust. So what are the practical steps for |
| book or a seminar? | | | | going about the business of developing |
| | | | trading skills? |
| We all have discovered that trading is not | | | | |
| easy and one of its biggest challenges is | | | | As a novice it is helpful to trade a simple, |
| following our signals, be they based on an | | | | logical system. This appears to contradict |
| indicator or our intuition. It is so easy to | | | | the stance I took against system vendors |
| doubt our signal when the moment to act | | | | above, but what I am talking about here is a |
| arrives, we hesitate and the opportunity is | | | | systematic way of having a view of the |
| gone. So having learnt our hero's strategy we | | | | market. My objection to the system vendors is |
| then have to become adept at implementing it, | | | | that they maintain that their system is all |
| which brings with it a whole host of problems | | | | that is required to be successful, whereas in |
| that only become apparent as we attempt to | | | | reality it is the ability to implement a |
| execute the system. Now the issues that get | | | | system or strategy that determines success. |
| in the way of implementing a strategy are not | | | | As your trading skills evolve, your ability |
| issues that any system vendor can resolve in | | | | to read the market will evolve; but until |
| a book or a weekend. | | | | then you will have no valuable opinion, so a |
| | | | simple, logical system will give you a reason |
| In fact the system vendor would have it that | | | | to buy or sell. |
| all our previous problems with trading result | | | | |
| from not having a good enough strategy, which | | | | In attempting to trade these systems two |
| of course is a problem he can easily solve | | | | things will happen; firstly you will find out |
| for us. The basic premise of the system | | | | the issues you have that you need to resolve |
| vendor is that all the psychological issues | | | | in order to progress as a trader; and |
| in trading, in fact all the problems we have | | | | secondly in the course of trading the system |
| in trading, are a consequence of not having a | | | | you will start to make observations and |
| really good system or strategy. This I do not | | | | distinctions that will enable you to be more |
| believe, it is like claiming that we could | | | | discerning about picking trades. The issues |
| all play golf like Tiger Woods if we had a | | | | that you will come up against will be the |
| certain set of golf clubs, or that we could | | | | feelings that arise that will prevent you |
| achieve the same level of success as Pete | | | | from executing your system flawlessly. You |
| Sampras if we used the latest racket. | | | | will need to neutralise these feelings so |
| | | | that you are no longer a victim to them. |
| We all need golf clubs to play golf or a | | | | |
| tennis racket to play tennis, no question; | | | | I believe that to have some sort of support |
| but they do not determine our success. Tiger | | | | while developing as a trader is vitally |
| Woods would still be a great golfer even if | | | | important. A trading coach, for want of a |
| he was handicapped by playing with antiquated | | | | better phrase, will help you to navigate when |
| clubs, but no novice golfer is going to be | | | | you feel lost, and will give you an objective |
| transformed into Tiger Woods simply by buying | | | | perspective when you are wallowing in doubt |
| the right equipment. | | | | and uncertainty. As a novice floor trader I |
| | | | found the support of my backer essential in |
| If the system vendor has perfected the | | | | developing trading discipline. Support does |
| perfect trading system and if he has | | | | not have to come from a professional coach, |
| developed the skill to successfully implement | | | | two traders could support each other, or a |
| this system, surely the most effective method | | | | novice trader could seek out a mentor. |
| to share his good fortune would be to create | | | | |