When I read a Michael Douglas’s phrase saying : ” Trading is only a question of probabilistic events”, I accepted and liked, but I didn’t realize the main message of it. There is a trend that all services who work with financial markets have, it is justify all movements of the market with economic causes and politics decisions ignoring the noise of the panic and the greed of traders. I think that you can’t be either consistently or successful in trading with decisions based on economic numbers ( I am not talking about hedge funds firms neither investment banking). Trading is a game of probabilistic patterns that happens over and over again since the beginning of the financial markets. It works and exits because the human being is an animal of habits and react about some events always in the same way. For me the only importance of economic numbers in trading resides not in the number itself, but how traders and everyone else will react knowing this number. If you chose a patterns that adapts of your style, built a strategy for it, and execute your trading plan as you must follow, you don’t need economic information. “And if I build up my strategy based on patterns that results of economic information?”- it is a reasonable question, but you should understand that even doing trading with it, your decision is based on price (pattern) not evaluating or deciding with job’s report neither unemployment rate.
First of all, I hate casino and it is much gambling for me, but I recognized some similarities with trading and I will share it. When I went to casino, one of things that I just figured out was that people could be so greedy and mentally weak. They search pleasure and some adrenalin. I am sure that people in markets behave in the same away.One day, before playing roulette, a friend of mine told me that it has trend and could be possible obtain profit with some luck. I twisted nose, but after few moments I saw numbers that had more tendency to show up. I don’t know why, but if you see carefully, you will find some numbers who just out more than others.I have no doubt of this.The problem is when croupier repairs that you are achieving some lure or profit, again, I don’t know why and how, but the trend change. I was there 6 or 7 times and in only one time that I am got out with a loss. This happens because I established some rules before get in the casino:
1- I played only 30 minutes each time. ( your judgment are spoiled with weariness)
2- Never drank alcohol ( either before or while playing). yours emotions domain your behavior.
3- I only lose three chips to see if patterns occurs.if it doesn’t, I leave the table and search other.
4-I plays if only my patterns occurs, that’s it!!
5-before get in the casino, I established the maximum amount that I am willing to lose.
6-when croupier changes, you also change .
7- so on…..
It is seems so easy and simple, but when you win your first chip, it is so difficult maintain your rules being rational!I am not saying that I like casino and it is profitable, because it is not, but it isn’t so random like everyone else think. The problem in casino and why it’s impossible be consistently on it, is the fact edges are done to casino profit. Even with some trend, the probability are in casino’s side, period. ( I never went to casino since then…).In financial markets you are trading against others traders,not any institution. So the edges are shared and divided.if you use the same approach that I am used in casino, you could be a successful trader. The edges are out there, you only must execute your trades as a machine and never get in a trade if you didn’t see your pattern.Discipline yourself!is the key!