Big Mike's Trading Blog

Day trading futures, discussing money management and trade management techniques, and more

Are you a trader, or aren't you?

Trading is simple, not easy.

All the price action in the world, all the indicators in the world, all the money management and technical analysis in the world is great.... but at the end of the day, what you are really doing is just trying to trade better than everyone around you. You have to out-trade the crowd in order to make money.

The saying is that 5% of the traders make 95% of the money (or so). In order to join the 5% crowd, you've got to trade smarter than your peers. It is "simple", because most peers are full of psychological and disciplinary problems -- they make inconsistent decisions and don't follow their own advice or their own trading plans. The "hard" part is for you to not fall into the same ditch.

The reason that learning price action is a powerful tool, and what I believe a strong step in the right direction, is because it can be done without indicators. And indicators are the devil. You would be far better off to have none than to have five or ten. Price Action is the closest thing to the "holy grail", because it is the most basic, the most pure form of analyzing the market. You guys have no idea how many private messages and skype messages I get daily begging me for indicators. Indicators, indicators, indicators! They see a new indicator on my screen and think "Shiny!!! If I had this, I could make money!!". Indicators can be useful, but they cannot make you profitable. If you aren't already profitable then please... PLEASE... just delete the indicators until you are!

Many traders feel they cannot be trusted to trade discretionarily after suffering huge losses. They look for some black and white answer in trading, "go long here", "go short here" and no such thing exists. They would be far better off refocusing that energy into learning how to re-condition their thought process and their minds to be better traders. Trading is a very intense process, it brings out a lot of emotions, it brings out the "fight or flight" response, it basically amplifies all the things wrong in your life until they are so pronounced, so unbearable that either you run away or you face your deepest fears and overcome them.

It may sound like hogwash, and you may laugh, but I believe in what I am saying and I've got experiences to back up my beliefs. Perhaps trading is different for every individual, because every trader has a unique set of challenges to overcome, and in doing so they learn to trade differently, being molded by these challenges like water flowing around a boulder. They adapt.

For me, I literally had to become a different person in order to succeed at trading. I had to curtail my impulsiveness, I had to learn to state my beliefs only when I had substance and factual evidence to back them up, and most of all I had to admit that I was wrong. That last part is key. Every few months I thought "oh, I've had a breakthrough... now there is no stopping me! Now I can make money!!". Wrong again. It wasn't that there were no breakthroughs, because in fact there were many. It's just that no single breakthrough was enough to make me into a successful trader. It took many, many breakthroughs and many, many admissions of being wrong.

There are no short cuts in life. There sure as hell aren't any in trading. I know some "traders" who are making huge profits but they are doing so in a way that cannot be consistently maintained. They are averaging down. They are taking huge risks. They have no money management. They have no exit strategy. They never define a "I'm wrong if xyz happens" scenario, because they never plan to be wrong! These traders may come around every now and then and make a lot of noise with their big gains, but they will be gone soon enough. Stupid people can get lucky, too. But to be in the 5% of successful traders, you can't be stupid, and "traders" who trade with poor risk management, no money management, and no exit plan are quite stupid. The market will humble them eventually.

Yet still, even after I write long posts like this, and hundreds more, people still believe that indicators will solve their problems. If I have one mission, one clear objective with BMT other than empowering traders to help each other, it is to try to reshape peoples energy away from indicators and instead focus that energy into proper risk/trade/money management and into overcoming the psychological challenges of trading. If only they spent as much time in these areas as they do playing with indicators...



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