Does it ever feel like there’s someone in your monitor watching your every move and trading the other side of the market, making your trades fail?
I’ve had many students make that comment.
Some of them were pretty serious and actually accused their brokers of trading against them. I had one student send me a copy of a document from a broker that stated that they may indeed take the opposite side of a position he has. He sent me a copy of a scathing letter he sent them accusing them of doing just that to purposefully profit from his losses.
I know it may feel that way sometimes, but I don’t think anyone’s broker is all that interested in a newbie’s $20,000 trading account. Sorry, it just doesn’t really hold much interest for them.
Still, it cannot be denied that it is often UNCANNY how the market seems to do the exact opposite of our trades … over and over!
- It does feel like it’s intentional.
- It’s so consistent that it really seems there’s someone watching us.
- It feels like there’s a real intelligence trading against us. It can’t be chance.
OK, the truth is that it isn’t chance.
The truth is that there truly is an intelligence trading against us.
But it’s not what you think.
It’s no one trader or trading firm.
And no, though it may feel like it, it’s not the devil.
It’s the collective intelligence of the market. In other words, it’s the mass consciousness. In lay terms, it’s the masses.
The markets move based on the principles of mass psychology.
In trading, a small number of people make a lot of money and the masses lose.
So to be profitable, you must be one of the small minority.
Now here’s a mind twister for you:
Do you think you will be one of the few who can be better than the rest?
If you do, then congratulations … you lose!
Why?
Because the majority of traders believe they will be part of the minority – the winners. So simply by saying you will join the minority, you are expressing the feelings of the majority and have established yourself solidly in the camp of the mass psychology!
Ouch. My brain hurts now.
So what’s the alternative? To think you will be a loser?
Ironically, in a matter of speaking, yes.
Most traders go into the market thinking trading is easier than it is, are under-capitalized, under-educated and overly optimistic.
The winning trader goes in expecting to lose.
Why is this smart?
Because you WILL lose.
Trading is a profession like any other, and it requires a lot of education and … EXPERIENCE before you become successful. While you are gaining experience you will be losing money.
Seriously, it’s completely ignorant and frankly insulting to professional traders, to think you can read a few books, take a course or two, and then start making money in a week or a month or a year or two.
Would you have that expectation of becoming a doctor, or a lawyer or a professional football player?
But for some reason people think trading is easier than other professions.
It isn’t.
I can’t tell you exactly where trading falls with regard to “difficulty” in relation to other professions, but I can tell you this – new traders grossly underestimate the difficulty.
I’ll grant you this. It looks easy from the outside. It is “deceptively difficult.”
It’s a performance-based profession and very, very psychologically demanding. It’s more like being a professional athlete than being a doctor or lawyer.
It’s less analysis and more performance than most think.
Now, back to the beginning of our article …
You ARE part of the mass psychology. The reason your trades seem to go against you in such an uncanny fashion is precisely because you’re thinking and behaving like the masses.
Don’t get down on yourself. What you’re doing is simply “human.”
As much as we pride ourselves on being individuals, the truth is our common traits are much stronger than our individual ones. Humans are by nature social beings. We have a herd instinct.
So when we trade, that instinct comes into play. It’s the most natural thing in the world and everyone does it, because it’s instinct.
But to be successful at trading, you must stand outside the herd. So in a way, it can be said that …
GOOD TRADING IS UNNATURAL!
As I’ve mentored students in my home I’ve been able to witness this first-hand. Student after student honestly believes they are doing something different from other traders. But as I watch them trade and look at their trading logs I see them all making the EXACT SAME MISTAKES! All of them … without exception. It’s almost eerie!
So how do you overcome those natural instincts?
Stay tune for part 2 of this article!
if a person sets out to be unsuccessful and achieves this,does it mean they are a success.We all are part of the masses but we need to be aware of this. ie when the market is making record highs we have to go along with the herd even though we know it wont last.If you try and go short in a bull market you get killed.I liken successful trading to being the perfect christian because you need to overcome the 7 deadly sins.No one is perfect but just dont make the same mistake twice.
Looking forward to part II. I am grateful for all your time and teachings. There might be hope for me yet..
Luvnrio – “Go Long on LIFE”.
Hi Barry,
Very well expressed. Perhaps even the hope that trading must be something “natural” and therefore easily attainable, is another one of those normal human traits. It may be more of a problem than ever before, as the masses have now become so saturated with mass media, that everyone naturally thinks they are so well informed, savvy, brilliant, or at least “smart enough” to be smarter than the masses. Another “natural” tendency of all of us, as “members of the masses”.
Nowadays it also has become fashionable for the masses to perceive that everything is attainable if one is “natural”
enough—–so everything should be easy. Of course this view requires deep examination as to what is “natural”. Usually the attainment of that “natural” state requires many years of rigorous study and/or training, to overcome all the “unnatural” bad habits we have accumulated over a lifetime.
(This has been a lifelong learning process I am still working on, in my study of martial arts.)
In my own experience, it took me about 15 years of active day trading to achieve what I would rate a good level of skill, and dependable constant profitability. I feel your method definitely is entirely sufficient for one to be profitable. Of course, as you say, the skill to execute it or any other method, is the variable which may require very serious commitment, training, practice, discipline, and all those other “unnatural” qualities, the ones uncommon among most “normal” human traits.
Of course, another natural human trait is that people will readily agree with this, yet not really believe it. They will assume they can shorten all the steps, and master it all in no time, just like I did when I started, and just like everyone else.
Thank you very much for sharing this key insight into trading.
The vast majority CANNOT overcome the instincts which make them bad traders. If one is truly honest with themself, they would realize this truth and accept it. It has nothing to do with intelligence. Why am I musically gifted and otehrs are not? Who knows. Genetics? Regardless of the reasons why, teh fact is that I am musically gifted and most people are not. In the same vein, there ar those whoare WIRED to perform well in the stock market – but the vast majority of us are not. notice I said “us” (not “them”).
It is pure folly for the average person to think they have what it takes. As silly as me thinking – even with my way above average musical gift – I could play guitar as well as Jimmy Page or Al DiMeola. Think of how many people play golf. Now how many of them honestly believe they will ever be a scratch golfer, let alone a Tiger WOods? So why are people so unrealistic about their abilities when it comes to investing? Articles, books, seminars that pretend to address this issue are selling snake oil, because it cannot be learnt. Only the VERY few who are already predisposed ot doing well in trading or investing can benefit from improving their skills. The rest simply don’t have it, and no amount of knowledge will help them.
I have been trading and investing for a very long time, and have been successful at it. Yet, I have reached the conclusion that I have no business managing my own money, and plan on handing it off to someone else. Now, if a long-term provable successful guy like me has reached that conclusion, how does that stack up against the millions of poseurs? The problem is, that I now believe my success has been luck more than anything else. As expereinced as I am, and as much as I am far more skilled than the average trader, I still have reached teh very unsettling conclusion that it has been more luck than skill. It pains me to say that, but I believe it to be true. People can pretend all they want, but that’s the honest truth – most successful investors are flukes. Unless you’re wired like Warren Buffet or George Soros – don’t bother trying.
One last thing. PET PEEVE: I wish writers would stop using the term “beat the market” when talking about the investing masses. It’s so silly. Most investors are not trying to beat the market. Where did this idiotic idea come from? We know that most investors will not come close to matching the market let alone “beating” it over the long run. But the idea that they are TRYING to do this is truly nonsense. hat is NOT the way the masses look at how they trade ro invest. They dont’ even get that far in their thinking. How many of them really do track their long term performance? Very, very few. And how many then compare theri performance to a benchmark? Even fewer. Most just look at theie account balance, up or down, and say “I had a good year, or I had a bad year”. Nothign more sophisticatesd than that. In all the years of investing, I don’t think I’ve ever heard an individual investor state that their goal is to beat the market. Making a killing is what most of them are after. And for others, just doing it themselves rather than handing it of to someone else is what they are after. Institutional money managers are about beating the index, but they’re a separate group, and are motivated by different factors. I’ve been investing for over 30 years, and am a financial adviser, and I have never met anyone who has honestly and meticulously tracked their AFTER-TAX and AFTER-FEE performance (IRR) over the long run. Not one. The notion of “beating the market” would be a giant step up for the average investor. It woudl force them to be more disciplined than the vast majority ever weill be.
I make my first post on Barry’s blog here, as a person seeking to make a success out of trading. I am relatively new to it.
Psychologically, I have been quite fascinated by finding myself, in certain times past (and sometimes still present), doing everything in exact reverse. If I had been just doing everything in an average win/lose way (i.e. chance), it would not have attracted my attention and interest in the same way.
However, the ‘reverse times’ have left me feeling that unconsciously, my mind has known exactly what it going on, and that for various reasons it is holding back in its ‘advice’ and ‘promptings’ to me… most likely, I feel, because there are things I yet need to learn in the process I am undergoing. The unconscious cooperating too early, it always seems to me, might shortcut such a learning process. In this regard, I take a certain comfort and confidence from my reverse trading experiences.
Uncoupling from the herd mentality certainly seems to be part of it – and I can really emphasize with what you describe Barry – though at the same time, I find myself wanting to defend something in us, as I find the emotions and feelings we all experience very precious, and in many ways would seem to be capable of being extremely rational themselves, if given a good framework. Ultimately, emotions and feelings would seem to be what make us both truly human – and sometimes not so human.
I always seem to have a phrase by author and psychologist/philosopher James Hillman to mind where he describes how archetypal myth begins where [emotional] reason ends.
From what I observe, successful traders have a fairly dependable trade set-up in place, and they then manage that trade once entered – professionally. Barry’s logs seem an ideal way for me to me to bring my unconscious to that point – and thus bring it on board and/or – on the same side. Where the unconscious is concerned, it seems to me, that it has to be channeled, by a means similar to the function that the banks of a river perform.
Slick, in conjunction with this and what you wrote – I can’t help feeling that the process of me learning trading is prompted in part, because my unconscious is wanting me to learn to consciously manage my luck much better.
I hope this makes sense, and hello to you all.
I can not determine how do I subscribe for your weblog
Whoa! This blog looks exactly like my old one!
It’s on a completely different subject but it has pretty much the same page layout and design. Superb choice of colors!