Emotional Blind Spots

BarroMetrics Views: Emotional Blind Spots

I received a very long, and interesting email. The author has asked me not to quote any portion, so I’ll honour the request.

The thrust of the email was to pose the questions:

  • if I have a system that makes money, why won’t that guarantee I become wealthy?  
  • why do so many players of the markets, lose money if there are so many methods claiming to be successful?

Let’s take the second question first. My reading between the lines suggests that the real question is: can I trust the vendors of trading systems?

The short answer, ‘yes’, sometimes. It’s a matter of ‘caveat emptor’.

Undoubtedly, many systems and methods sold have no chance of making money. But, there are many teachers who are providing a valuable service e.g. in my case, I owe a debt to Pete Steidlmayer (Market Profile), a genuine educator; but for his instruction, I may not have achieved what I have.

The bottom line is you need to do your research and determine if the claims made for the system have a probability of being genuine. And yes, there will be times when you will be conned. Get over it. Treat the money spent, and money lost, as lessons learned.

And before, you decide that a course is a con, ask yourself this: have you done everything you can to lean and implement the course? Have you kept written records of your efforts and results so you know you have done all you can to make the course ‘work’?

You’ll be amazed at how many attend a course and then fail to implement it the material in the way it was meant to be implemented.

If I had only one bit of advice to give you: discard your unrealistic expectations of easy, instant wealth. Becoming a successful trader is probably one of the most difficult things you can do. It requires a special kind hard work (deliberative practice); the highest degree of self-honesty and self-awareness and a commitment to constant improvement.

For more on deliberative practice and trading success, Google  “deliberative practice and trading success”. There is a wealth of information available. 

On self-honesty and self-awareness: we are built to project our best image. And so, few are willing to admit that their studies have not brought them the success they desire, admit especially to themselves.

And yet, this admission is one of the first steps to success. Without it, you will probably not look into the causes of your failure; and unless you are aware of the causes, you are unlikely to take the steps you need to take to change ‘failure to success’.

On constant improvement: the trading  environment is constantly changing. Unless you evolve with it, you will be left behind (i.e. if you have been making money, you will fail to achieve the returns you used to achieve). Improvement is not a luxury but a necessity.

If trading is so hard, why not take an easier path?

If the answer were only a matter of returns, I’d say: “in what other profession are 90% (and more) of your competitors so willing to hand you their hard-earned money?”

But, it’s not just about the money….for me trading provides an independence not available in any other field. In trading I am solely responsible for the results I receive. I can’t say that for any other profession.

The first question is more difficult to answer, I’ll deal with it tomorrow. 

8 thoughts on “Emotional Blind Spots”

  1. I think One must build one’s system him/her self, you can purchase some systems,but they are just able to help you to create more ideas on trading, They will not work or work for you unless you have done the hard work yourself.

    If you purchased a mechanical system,you should backtest and forward test it by yourself with you own data, if you brought a discretionary rule based system, you should use a simulator to test it.

    whether the system is useful or not, you will gain understandings about the market,trading skills and have more confidence in yourself.

  2. Hi Wenda

    Thank you.

    There is a wealth of info in this short comment. I’d like to add a reflection on each relevant point:

    1) “I think One must build one’s system him/her self…If you purchased a mechanical system,you should backtest and forward test it by yourself with you own data”

    I could not agree more PROVIDED the trader has the
    trading knowledge, understanding of probability an statistical theory, and computer skills to do the testing.

    The qualification is an important one.

    Indeed, this was my error when designing Ultimate.

    I assumed that if the student had a thorough grasp of Ultimate theory, she’d be able to create her own mechanical trading system – should she want to or need to.

    Recent events have disproven that assumption.

    So if the mentee does not have the skills what can he do?

    Well, he can do his research on the instructor, and then trust the the instructor’s ideas and their suggested application – at least until he becomes familiar with the application.

    This is the route I took with Wyckoff and Market Profile. I learned and applied the ideas, as taught, before adapting them.

    Or take the other route, and farm out the testing – harder to do because the tester has to share the trainee’s understanding of trading theory.

    2) “should use a simulator to test it”.

    Agreed but not only for a discretionary approach but also a mechanical one.

    Anytime you learn a trading theory, I recommend you test your understanding on a simulator.

    In our beta tests of the mechanical system I devised, the student first spends time ‘trading’ the simple rules on a simulator. The purpose of this dry run is to ensure that the novice has a thorough understanding of the system and its application.

    We are in our second run of testers, and every single one has asked at least 4 questions. This for a simple 5-rule system. Goes to show how important simulated trading is for learning.

    So “Yes!” – simulated trading (to become acquainted) is a must.

    3) “you will gain understandings about the market,trading skills and have more confidence in yourself”

    100% in agreement.

    Thanks again for a great comment.

  3. – if I have a system that makes money, why won’t that guarantee I become wealthy?
    – why do so many players of the markets, lose money if there are so many methods claiming to be successful?

    Aiya, even a perfect trading system that works in the past, it will not guarantee that it will work now nor future because markets and paticipants keeps on changing lah!

  4. Hi Paul

    Yes of course.

    There are no guarantees in the market. But that’s why large profits, over the long term, are possible for those who apply Mind x Money x Method and why ruin is likely for those who don’t.

    That said, I think you miss the import of the question: “if the system is working, why can’t I load up enough to become wealthy in the short term”.

    In short the author has unrealistic expectations of what is possible.

  5. hi Ray,
    The original question
    “if the system is working, why can’t I load up enough to become wealthy in the short term”.
    does not have the words “short term”! 🙂

    How short is short?
    – 1 day?
    – 1 week?
    – 1 month?

    For statistics/Expectancy to work, the population/sample size must be reasonably large.

    Could we have reasonably large population/sample size in the short term?

  6. Hi Paul

    “The original question ….does not have the words ‘short term'”.

    Yes, that’s why I said ‘import’.

    ‘Large population’in short term: Usually 30 is the minimum number for sufficient size. Whether or not we can attain 30 trades depends on the timeframe being traded.

    Recently I was negotiating to supply traders to a Singaporean prop house. It expected at least 30 trades a day.

    I have no idea what timeframe the author of the letter is trading.

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