 |
|
|
|
| ForexSAM - Conventional Wisdom | |||
The world is built on opposing forces, arms vs. armors, spears vs. shields, yin vs. yang, and so on. The same is true with the marketplace where buyers and sellers square off at each other. The end result of market action is basically nothing more than the one of up and down, back and forth price movements. Hence, winning and losing, profits and losses, successes and failures are all inescapable parts of the game for anyone who chooses to participate in the marketplace. In laymen’s language, if you win, sooner or later you will lose; if you lose money, sooner or later you will make some. This rule, of course, does not apply to anyone by the name of God or fraud. The task for common traders, then, is how to tip the balance of the seemingly zero-sum-gain dilemma in their favor by somehow edging profits above losses. The first step to undertake such a task is to simply recognize and accept the above market facts as inevitable truth. Otherwise, as often seen is the case, people would be willing to lose their last dollar to the market, by making the mistake of not accepting that they can run into a bad trade once in a while. It is much better to take the loss of pre-determined amount for a losing position than it is to hold onto it and risk turning a bad trade into a worse one. As much as winning is a given, losing is also part of the game. If you consistently take care of losing, then winning will eventually take care of you. If one doesn’t dare to look at losing in the eye, then one doesn’t mind never waking up from sleeping with losses all around and about. The second step to staying on the winning side is to learn whatever that can be learned about market behaviors and their characteristics, while accepting that no known price pattern can last forever without changing into part of another pattern periodically. This rationale is no different from why cops can catch robbers at 12:00 o’clock high once the pattern of high-noon robbery becomes recognized. For their own shake, robbers would then go on to work at midnight, or at 6:00am, or at random, or back to 12:00 noon, as sheriffs try to adjust to the fluid situation with changing tactics of their own. The market works more or less, in fact exactly, the same way. When a pattern is recognized by all, that pattern is then in need to change and it will change. With technical acumen, some traders may gain a touch of advantage by reading the subtle signs of pattern changes before they take place. Without it, others can always fall back on their well-thought-out contingency plans to cope with changing markets. The third step to help ensure victory over time is to replace second-guessing (which can be just as harmful as it might be helpful) by safeguarding every trading system, analysis, strategy, and plan with a bailout policy, which is otherwise known in this website as RRR rules, short-termed for “risk reward ratio.” Given that there is a risk to everything we do, there must be a maximum allowance of risk assigned to everything that we attempt, beyond which denial of defeat would kick in for the better or the much worse.
The last step to success, in
addition to the three above, probably has to do with
consistency, discipline, and perseverance. These three
characteristics are common of any mechanic trading
system that appreciates neither joy of victory nor agony
of defeat, both of which paving the foundation of greed
and fear that dreadfully affect most human traders.
Given that robotic trading, however impractical or
improbable to apply for real, tends to outperform human
in backward and forward testing, its care-free
nonchalance to winning and losing a trade may indeed
have some valuable merits to offer those of us who must
exacerbate over every single trade. |
|||
Please email your
ForexSAM Hosts with questions or comments. |
|||
