No courses, no horses.

Over the last few months there has been much reflective practice. This is about looking back at what one has done in the past, learning and re-learning from mistakes, and understanding how novices to financial trading approach it.

A mistake is usually, in simple language, recognising a genuine error that has happened. Learning from a mistake means doing something differently to avoid it happening again or reducing likelihood of recurrence. Understanding how the uninitiated think and approach trading is useful because there is greater self-discovery – there is discovery of attitude, mindset and lack of awareness.

Learning from mistakes when wrestling with a chaotic environment is not easy. It’s not simply, that something went wrong so don’t do it again. There may have been no genuine mistake i.e. a chaotic system just worked against the trader. So discovery of mistakes is about finding a pattern of ‘wrongs’ done in trading. This means that mistakes may be repeated before they are truly discovered. Making amends is not easy. Why? Because this may be about something on charts or in the markets. It is about the individual and their own personal psychology (not popular psychology about what people tend to do). It could be a mistake of mindset.

Novices have huger hurdles than they can possibly imagine in becoming consistently profitable – by way of a demonstrable positive expectancy ratio. The following are some:

1. They come to trading with an attitude or mindset that ‘it’s something that can be learned or ‘one has to be born with a gift but will give it a go’. There is no ‘it’ to learn. The markets are not truly about charts, trading systems, methods, mathematics or computers. The markets are about ‘you’ – the person you are. No – it’s nothing to do with personality types. This is about individual psychology – how you work.
2. They like most people have both a belief and attitude that it’s something that can and should be taught. That’s understandable because most adults will have been conditioned most of their lives by systems that deliver information and train people to do things. The reality of a seasoned trader is that – as said above – there is no ‘it’. There is only you! This means that there can be no course to deliver information on what you are, your attitudes, your biases, your weaknesses, your strengths, the quality of your analytical skills in relation to a unique, complex and chaotic system. Even if there was such a course that delivered the information, you are the obstacle to changing you. There is no horse to pull your forward – no mum and dad or significant other, to encourage you and motivate you on.
3. The degree of self-directed learning about the ‘self’ required is beyond their imagination – but may be discovered later on through repeated failures, pain, introspection, and reflective practice.
4. The motivation required to endure repeated punishments by the markets in the early years and still push on against demotivating and demoralising results, is totally underestimated – but essential to self-discovery. No – this is not pop psychology about self-mastery.
5. Attitudes not only shape perceptions and learning but may distort them. The importance of some gem may be overlooked, pushed out of the mind or simply ignored. Attitudes and mindsets alter receptivity. The classic example is where novices hoping to limit losses make too tight stop-losses and get slaughtered by the markets. Their problem is usually two fold a) psychological i.e. anxiety about losses b) lack of a method for determining reasonable stop-losses. In fact the problem is far worse, because factors such as greed, hope and desire affect entry points. The ‘gem’ is therefore about when to enter at all and that all trades need to be carefully assessed for worthiness of entry, then managed in the trade, exited, and reflected upon. These are cognitive and psychological tasks. Why psychological if it’s just about numbers on a chart? Simply because the numbers mean nothing, or extreme danger unrecognised, if psychological biases are not factored in any analysis.
6. They need to be right. Most people need to be right. The bad news for most people is that trading environments will prove you wrong more than 50% of the time on average. An employer would be hard pressed to keep you on in the job if you were consistently getting tasks wrong 50% of the time over a prolonged period. The usual grooming over many years of most people to get things right, works against them in this sort of chaotic environment. Getting it wrong 50-80% of the time is not expected to work well for most people. Eventually expert traders achieve a profitable ‘win rate’ of about 60% – which by employment standards is still rather worrying. Would anybody be untroubled in going to see a doctor who declares that he gets his diagnoses right only 50-60% of the time? Unlikely.

The assertions from this site that most courses and ‘horses’ are a waste of time and money, will appear extremely strange to those who cannot appreciate the uniqueness, complexity and chaos of trading environments, and how all that is connected to individual psychology. There are courses to show people the basic nuts and bolts on trading, but all that information is available for free – and free of charge if self-directed. There is no course to teach you about you – it’s that simple. You are the biggest hurdle in achieving consistent profitability.

New traders have a steep learning curve to master the basics and to gain experience in risk-free environments before even thinking of profitability. Mastery of the tools and mental processes for managing chaos does not come easily.