Developing your feel for a market

I received some immediate feedback about why does it take so long? And I got an email from somebody, an email from someone like late last week that I want to address. I’ll address that separately because it’s much longer email. The feedback in the short run on why does it take so long is because whereas it’s easy for some of you to understand the fundamentals and where it’s easier for some of you to understand trend lines and chart patterns, if you don’t have a feel for the markets or the market that you’re trying to trade, it’s going to be very, very hard to become a success at trading that market.

And that only comes from doing so. If you’ve heard me say on other episodes the best way to learn to how to trade is by doing it. That seems “bass ackwards” to some folks because through everything else you’ve tried to learn, there’s been a course, a teacher, a book or something like that. You’ve never really said, Hey, dive off the deep end of the pool and teach yourself to swim so that you can learn to be a good swimmer. That wouldn’t be terribly practical unless you had 10 people watching you in good dive in to save you. But you know, that’s kind of what we’re getting out here. You have to have a feel within the feel is where your trading edge is. Your trading edge isn’t going to come from a chart pattern. Everyone’s looking at the same chart.

Now maybe you have some fundamental insight that’s unique, but in the short run that’s guesswork. You see? And so even still, I think the commodities corporation guys proved that you can’t really trade on PhDs alone. You need to actually have some trading skill. And that’s why I say it takes a long time to get, It’s also why I’m not selling a junk courses because I think it’s unethical to charge people $10k to learn how to trade when it’s hit or miss whether or not they’ll actually be compatible with the very rules that I’m teaching. I know it costs me millions, but I have to go to bed with myself and then shave my own face in the morning. Those are my rules for myself.

And so that’s why I’m very skeptical and suspicious of people who do sell those trading rules because you’re there saying, Well if I just learned how to do this, like it’s a driving lesson. What did getting a driver’s license or a learner’s permit do for you? Did that indicate you were a good driver? No, not by a long shot. You still probably sucked. You had your mom or dad next to you, you had the babyseat in the back seat. It just said that you met the minimum requirement to achieve a learner’s permit. You didn’t really learn to drive well until you actually put the time in behind the wheel and became more comfortable with the wheel. Learn how to handle a car.

Doesn’t matter what kind of car you’re driving…but just remember though, you can soup up your cars and put all that bullshit on it, but at the end of the day, it’s still a Honda…it’s an inside joke in California. Anyway, you need to understand that no matter what you learn or how fast you can learn it, you’re going to need to develop a feel for the markets. And that’s unpredictable as to if and when it’s going to come. So for some people it comes right away. But if you read the stories from market wizards, it didn’t happen for the majority of these people overnight. It took them a while.

Some people refer to that period of time as like the hazing or the emotional tuition that you have to pay. There’s lots of words for describing the same thing. But everyone has to pay. If you want to dance, you have to pay the fiddler and it’s going to come in the form of trading losses. So you cannot study your way to financial freedom. There’s a lot of things that you could learn academically, but we get paid to execute. So now all of these lessons as we kind of come to, as the sun is setting probably on the podcast, they’re all coming full circle. You have to have a feel and you only get a feel by the doing of it. And by doing of it, it means you need to risk that money. I was talking with a client at first it was hard for them to let go of the money because they were thinking like consumers.

Every time they took a loss, they would immediately start to think about all the things that they could buy with that money. And so that’s a tough one to come out of if you are coming from a working class background and didn’t have a lot of money, it’s understandable, but you have to also understand that you have an investment account, which is to grow your money. If you kept it in a savings account -savings you know, is a whole other ball of wax. Savings in terms of economics is really the act of not consuming. It’s almost there for deferred consumption. Investing in tradings a different ball of wax. You know, you’re there to kind of grow your money and that means you have to risk money. I’d also, as you develop your field, get comfortable with losing small bits of capital more frequently, that you earn the the money – many multiples more capital when you win.

You have to get used to the expected value of a trade and that also takes a while. You have to learn how to trust yourself in getting this feel and no one’s immune to it. That’s why trading is so hard. It’s like, yes, anyone can learn it. Of course that’s easy. The marketing jackasses tell you that all day long. But even the best go through losing streaks. So to answer a question as to why is it, why is trading so hard when it looks so easy from the outside, it’s because on some level, it’s not really academic, it’s performance based.

This is a computer generated transcript.

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