So trading is a zero-sum game?
‘I think it’s a minus-sum game. The amount of money is very large. I had a number in my first book, Trading for a Living, and I thought it was the most scandalous number in the book. Nobody paid attention. 25% of profits and losses. 25% of change. They get lost in the machinery. That’s what makes trading so difficult. Trading is expensive.” – Dr. Alexander Elder
“If we want a consistently profitable trading strategy, we had better make sure that the person on the other side of our trades is a consistently losing trader. Our strategy had better be an expert at finding a novice trader or we are in trouble. We don’t need to know the exact person on the other side of our trade; we just need to know if they are consistently profitable trader or a consistent losing trader… From my reality-based market experience, trading is a simple transfer of accounts from those who don’t understand simple market logic into the accounts of those who do. Trading strategies just expedite the process.” — Sam Seiden
Where does profit come from in trading, and where does loss go? The simple answer: From other traders. You take money from other guys. And other guys want your money. This is a very important fact of trading. Anyone who says trading is easy is telling a lie – unless the person is a highly experienced veteran. And as such trading is only easy for her/him, but never for a beginner. You now can see the reason why it’s suicidal to believe what a sly spiv says on ads. I saw a note in my diary during my novice years; I was promising someone a minimum of 300% ROI per month. It’s now very disgusting to me that I ever promised something like that. I’ll now hardly promise 100% in a year! In those days my head was full of daft trading ideas, driven into me by crafty marketers. Please don’t laugh as it’s not funny at all. Trading is survival of the fittest – a high-performance activity. For you to succeed as a trader, you got to be smarter than most traders. You got to be unique; you got to posses unusual skills. What can make success elude some and come to you if not for uniqueness?
Every beginner is under the illusion that they know the right things about the markets. There’s a great difference between what traders think they know and what they can actually do. No-one is immune to losses on the markets, no matter what or who they are. Every trader is subject to the uncertainties of the markets. Let’s see what two bright trading minds have to say:
A. ‘People don’t know what they are doing… Day in, day out, people jump into the markets recklessly: without experience, without training and most definitely, without any type of formal plan… The market does not owe anyone great riches. It will occasionally tease a large number of people with seemingly easy gains (during bubbles and other manias) only to take them away again.” — Van K. Tharp B. ‘The number of traders worldwide is increasing geometrically, with the majority of newcomers lacking experience and making a lot of mistakes.” – Mike Baghdady
This isn’t limited to trading alone. If you quit trading and try to do other things, you’ll also face cut-throat competitions. Everything out there got their risk and hazards. It’s merely a simple fact of life; rich people become rich at the expense of others, whether those people willingly give up their money or not. You know, in the wild, some animals survive at the expense of others. You can’t see the ladder to success being crowded at the top. I’m not trying to scare you. Honestly if I saw someone who told me this truth when I was starting out, I wouldn’t go thru my past painful experiences. I’d train very well and make sure I knew the right things and do the right things on the markets before I put my socks at risk.
You might want to subject your future to those who hire and fire people at will or you might want to be like those consistently successful trading experts who are truly financially free. You can overcome your obstacles if you really want to make dedicated effort. Most people are afraid. Those who’ll make it in life aren’t afraid. You need to decide what you want from the markets. If you don’t make a decision now, you could spend the rest of your life as a post office clerk. Some could even be thinking that you’re disadvantaged and thus can’t make it in life. Your potential is limitless and can’t be measured by the opinions of others. You aren’t hapless and hopeless, you’ll succeed. Life is ready to give you what you want for the price of an effort. Many people believe Albert Einstein to be a genius, but Albert himself said, ‘It’s not that I’m smart, it’s just that I stay with problems longer.” Dr. Alex says that in this life, you’re dealt with a deck of cards. Some people get better cards, others get worse cards. Sometimes people with very good cards just throw them away and sometimes people with very bad cards play them very well. Dr. Van also adds that if you are serious about being a good trader, then you need to approach the practice of trading with the same level of rigor with which you would approach any high level of endeavor or business. There are many career opportunities in trading.
If you’re already a successful trader, please accept my congratulations. If you’re still struggling with trading challenges (and transient they are), you shouldn’t worry. There are solutions for you, especially if you’re still new to trading and it seems you can’t pull the trigger. One of the best solutions is to learn the ways the trading masters behave on the markets while trading. You need to know their mutual secrets, plus the principles that make them trade successfully – even surviving losing streaks. You need specific suggestions for controlling your mental state. These would be explained in the concluding part of this topic (part 5). You’ll learn how the best traders and investors in the world remain unemotional, calm and detached when they trade, thus avoiding fearful responses. You’ll know how they wait for the best opportunities, avoiding impatience and overtrading. This can make you become smarter than many other traders.
Your questions and opinions are highly welcome.
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