WELCOME TO NEWBIE'S CORNER !

 

Congratulations!

You are about to start your journey as a trader ! If you make it, you will join the world of the elite few that have the privilege to trade for a living. It may be a short bumpy ride, or it could very well turn out to be an epic saga fraught with trials and tribulations ! 

It all depends on you !

Many traders believe that when they lose, it is because they have somehow 'misread' the market. Nothing could be further from the truth ! What they have actually 'misread' is themselves ! Most of you will not understand what I mean by that statement. But those that survive as traders know it all too well. The whole industry has been designed around trying to 'read the markets', or to get 'behind' what is really driving price action. We construct and overlay all kinds of 'rules' that we believe the markets will obey. Sometimes it seems to 'obey' these rules and at other times it is totally oblivious to it. We then start to falter and question those rules, adjusting and re-adjusting until we find that they start to work again. Inevitably it fails again. Everyone is looking for a 'system'. That's fine. But ask yourself this. What has any system to do with anything in the market ? Many believe that they can just plug some price data into a system and expect to be able to sort that random data in such a way that will produce winning consistency. They believe that they can 'systematize' the market. What we have really done is placed our expectations on something that references mainly unto itself !  

What are we to do ? You may find, to your utter surprise, that the only obstacle in your way to becoming a successful trader is you. The person in the mirror. Not only are you the obstacle, but even more  surprisingly, you are also the solution ! And I am not talking about discipline or sticking to the trading plan. That is not enough.

Hence, the very first step toward trading success may be the hardest ! It is unlike any other 'business' on this planet. This I can quite safely promise you. If you are going to come into trading with all the usual emotional, egotistical and customary beliefs that is part and parcel of survival in the real world, then you may not make it as a trader. The market will help you realise this fact very fast. The market is unforgiving not because it does not care, but because it is only expressing itself 'fractally'. (Fractalisation is at the heart of every system in the universe, and will be discussed in class in more depth.)

Just compare the 3 fundamental differences that exist between life and the markets:

1) In life, action produces a reaction. This is not obvious in random systems, and to some extent, the markets.

2) In life, basic logic dictates that 1 + 1 = 2. Again, this is not obvious in any way, especially when we are viewing highly complex and 'seemingly' random systems, where fractalisation is explained via multi-dimensional scalar mathematics. In such unbelievably complex systems, it is logical for 1+1 to be represented by an infinite set of values, a fact which is relatively easy to validate and prove mathematically. This explains its propensity to constantly surprise traders. Hence the market only 'seem' illogical to us, but is really not. It is logical only from a probabilistic perspective, as we cannot account for every action or event within the system.

3) In life, humans possess a sense of 'purpose', and we try very hard to 'project' and 'impose' this human sense of purpose onto the markets, believing that market action has a 'purpose'. We then try to decipher this attempted 'personification' of the market from a purpose-driven perspective, in the hopes that we may know what it is, so that we can predict its next move in order to profit.  This underlying anthropomorphism of the markets is all too common. Unfortunately, even though random systems have a higher level order, or 'purpose' to it, this occurs at a level that is much too high and complex, for it to be useful to us at present. Hence, for all practical purposes, the market seems, for the most part, fairly purposeless.

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In the statements above, I have assumed that the market is, to a some extent, 'random'. Many may argue that it is not random as it is actually governed by human emotion. There are 4 major problems with this argument:

  • human emotion itself is unpredictable and changes constantly !
  • human emotion may respond differently to the same situation !
  • human emotion itself rarely listens to mathematical logic !
  • put the three statement above together and multiply that by a few million traders in the market and you will produce price action that is pretty much random !

Some may also argue that it is not random as it is 'driven' by fundamentals. There are 3 major problems with this argument: 

  • fundamentals itself are largely unpredictable as many events occur unexpectatedly
  • even if the event occurs as expected, the crowd may still interpret it differently ! (People do react variedly to the same news)
  • Some traders act on rumours, some act during the release and others react long after the news release !  (The market is not as coherent and efficient as we imagine it to be)

Technical Analysis in a 'Semi-Random' Market

The market may be somewhat random in a sense, but at significant 'inflexion' points in price, we can still see a lot of  'action-reaction' activity taking place, though it is not always fully predictable, as you will see why shortly. The concerted efforts of a multitude of traders acting on obvious and widely recognised technical signals & triggers, produces this 'action-reaction' activity, which is clearly obvious at Support & Resistance levels, Fibonacci Levels, Pivot Points, Channels, etc.. and especially at 'confluence' points where indicators coincide, producing a greater effect.

Therefore, Technical Analysis is still an extremely effective and valid tool for traders, especially at significant 'infexion points' in price

However, there is a 'random element' to the markets, and as such, every significant 'inflexion point' in price will be affected by some randomisation effects. This randomisation reduces the effectiveness of technical analysis to some degree. The big question then is, how do we 'ride' this random and unpredictable aspect of market action ? Our performance would surely be phenomenal if we could only use technical analysis to trade the 'concerted' market action, while using 'stochastic maximization techniques' to handle the ramdomisation effects on our entries & exits! Only traders whom are able to minimise this randomisation effect on their entries & exits while applying technical analysis will have a future as a trader.  That is where the illusive trading 'edge' lies !

We Need Techniques to Handle Both Aspects of the Market

Therefore, we don't just teach Technical Analysis and pretend that the market will obey it ! 

We teach Technical Analysis to handle the significantly obvious inflexion points in price, while incorporating 'stochastic maximization techniques' to handle the adverse effects of  'randomisation' on entries & exits 

Please note that this is rarely done elsewhere. 'Stochastic Maximization Techniques' includes:

  • Critical $Mass Positioning
  • Stochastic Termination
  • Maximal Exposure
  • Opportunity Based Enties
  • Symmetric Positioning
  • Positive Asymmetric Positioning

Finally, we introduce the other 6 important elements in trading for consistent, long term profitability, via the 7-Factored Approach to trading. Remember, short term winnings are exciting, but no guarantee that you will survive as a trader.  

IT IS RECOMMENDED THAT NEWCOMERS ALSO VISIT DEBUNKING THE GREATEST MYTH FOR MORE INFORMATION.