Today I was chatting online with another trader and attempting to show an alternative way of taking a chunk out of the markets. You might think that there would be great interest in that. However, this trader said to me words to the effect that a new strategy meant a new mindset – and in a nutshell s/he doesn’t care about what I was showing. In other words s/he only cared about their own ‘strategy’. [I mean no disrespect to the trader in question, cuz I really think they’re a very nice person – and no, I did not feel slighted.]
But strangely I was not even talking about a change in strategy. I was talking method, using the same strategy. I was probably coming from a wrong angle because I assumed that all traders would be interested in any workable strategy that made money. After all what’s the point of trading? Well,in another post.. In general strategies are often confused and conflated with methods. There are differences. This will touched on
A mindset is a fixation in the mind about anything. It could be that you have a strategy and you know it works. It could be that you are comfortable doing what you do – so you feel you don’t need to do anything more or anything different. Or you feel that what you’re doing brings you sufficient results, so no need to look at alternatives. Pay attention to the word ‘need’. People often avoid doing things because they don’t feel they ‘need’ to. What’s this need about? Need is about some sort of pressure – either from within yourself or from circumstances in the world. But there is no clear separation. Most people ‘need’ money so they do things legal or illegal to get it. Many people don’t need to do more when their aspirations are satisfied. I am not saying that one should ‘need’ something so much that it amounts to greed. No – greed is a different thing. ‘Need’ seems to arise mostly from discomfort or something that is not satisfied.
There is a trap in all this – and it’s this simple. If you don’t ‘need to’, will you be driven to do much? I doubt. Since I’m writing this, what’s my ‘need’? My greatest need is ‘freedom to speak openly’. I know that I am unable to speak honestly about a set of things that are wrong with the world and the human race. If I do, lawsuits will follow and I need financial muscle to defend myself. That primary need, drives me to find a way to acquire enough money – so I can do what I want to do. Lawsuits? Yes – people don’t really like the truth being told and they’ll do whatever they can to shut up those who tell uncomfortable truths.
There is some kind of belief out there that to be a successful trader you must have a single strategy within a certain context that demonstrates profitability. So for example, you can only be a harmonic trader i.e. you can’t be a trend continuation trader and a harmonic trader at the same time. Or if you’re a spreadbetter you can’t be a binary options trader. Nonsense – I say! There is no such law. There is no rule that says, ‘If you do too many strategies you will be a loser’. The only well established principle is that if you don’t manage risk and money properly your chances of being unprofitable increase. A trader can have a stash of strategies – like a tool box. It doesn’t mean that s/he uses all the tools all the time or all at the same time. That would be stupid – wouldn’t it. See what I mean about free speech? I’m sure I’ve offended somebody or the other by now.
Many a seasoned trader falls into a set of traps. It goes like this. They develop a plan, habit and technique that makes them profitable and by repeating the latter they become more profitable. Hey, that’s like going to work as an employee. You’re doing the same set of things every day and you gets your money at the end of the month. And becuz you’ve been a good boy or girl, you gets a promotion and more pay. The difference with financial trading is that your earnings are not strictly limited by some salary scale. Some traders say that their earnings rate is limited by the capital they have to play with. I cannot argue with that because it is a mathematical truth.
But what if your earnings in trading was limited to a certain growth curve just because you adopted one narrow set of strategies or methods? What if you woke up 10 years later and realised suddenly that by adopting additional different strategies or methods, you could have been five times better off? Well, no turning back the clock – for sure!
This is what I’m talking about: your mindset in trading – your prime mindset, is to make big money. We all know that. You may start of small. However, overemphasis on making profits is a trap. You should be properly disciplined and all that, but at the end of 15 years you want to make it big – else stay in your day job and just climb the ladder. In order to make this ‘big money’ you have to ask a simple question, will my current rate of earnings from trading bring me to where I want to be in 10 to 15 years (or whatever). If yes – then do no more. But if no, then you decide if you need something more or something differently.
I assert that sound traders are receptive to new information and learning new techniques in trading. See also: Desirable psychological characteristics for traders. I say, ‘Do not limit yourself by any set of mindsets, or what other people say’.