Random Trading Thoughts – November 26, 2013

In Competition With Only Yourself

There was a time in my life where I thought I was in competition with various other friends and acquaintances in my community who also wanted to be traders.  Even after I got past that stage, I still thought I was in competition with various other traders and money managers that posted better performance than me or made more money than me.  And I did do and still get great trading ideas from people who are better than me, know more than me, and make more money than me.  I always search for new information that can improve my trading philosophy.

However, eventually I came to the conclusion that I wasn’t in competition with anyone else in life – whether it was another trader or any other person.  I figured out that I was in competition with myself.

I wasn’t really trying to compete against the market, or another trader or any other human being.  I was really competing with myself.  I was challenging myself to be the best person I could be.  It wasn’t really about what other people could do or achieve.   It was about what I desired to achieve and how fast I wanted to achieve it and what journey I wanted to take to get there.  It was about what challenges I chose to take on along the way.  It was about how hard I wanted to push myself.  It was about how much money I wanted to make and how fast I wanted to make it.

So when I am trading in the market, I am not competing against anyone else, even though there are so many other market participants involved every day.  I am still competing against myself.  To challenge myself to see how fast I can do the proper analysis.  To challenge myself to see what scenarios and insights I can perceive in the market.  To challenge myself to see how many different financial instruments I can trade successfully.  To challenge myself to see if I can pick out the proper information flow and interpret it correctly.

The moment I figured that out – that I wasn’t competing against anyone else – that I was only competing against myself and my own desires and wants – that set me free and lifted a big weight over my shoulders.

That is why, it is not a question of what other people want for you.  It is a question of what you desire for yourself.

As Michael Jordan said in the book:  I Can’t Accept Not Trying:

As Marty Schwartz said in his book Pit Bull:

And as Earl Nightingale said in The Strangest Secret:

Constant Exposure To Good Ideas and Information

I always try to be searching for more good information both related to my current trading style, but also new information related to potential new styles or changes that I can make.

However, sometimes I don’t have to search for new information or new books, instead I have to review old pieces of things I have already read.

There were many many times in the past where I read a critical piece of market information or a trading quote, but it didn’t sink in right away, and I had to go review it later on – perhaps weeks, months, or years later.

There were certain things that I felt I had to learn, but I couldn’t learn them if I just read them once a month or once a week or once a day.  I had to read it ten times a day, and look at it constantly as much as I could over a period of time, say a few days or a few weeks.  There was just no other way for the right information and insights to sink into my mind.  I don’t know if it was a learning disability or fear or something else, but there were just certain things related to trading that I had to have constant exposure to and repeatedly read and review in order for me to finally “get it” and eventually master it.

There were times I didn’t need to go view another forum thread, or download another free trading ebook, or buy another book.  What I really needed was to review the great trading information I already had at my disposal and interpret the information in a different way with a new mindset and new trading principles firmly in my mind.

I didn’t want to be stuck in the technical indicator or chart pattern cycle for 10 years, thus I figured out I had to focus repeatedly on certain order flow concepts over and over again.

I didn’t want to be stuck in the stop hunting bubble for 10 years, thus I figured out I had to focus repeatedly on certain news, information flow, and global macro trading information and concepts over and over again.

That is why I fear for some people who have not achieved success and they say that “they have heard it before.”  There are times when you have heard it before and you already know it and implement it and you need to go search for new information since you are on a higher level of the trading journey.  Those times do definitely exist.

But there are also times when you need constant exposure to the same or similar idea in order to finally understand it and make the kind of progress you are looking for.  Sometimes you don’t need the idea said in the same way, but are looking for someone to say it in a slightly different way.

Sometimes that is all you need in life:  Just the right book, or piece of information, said in the right way, at the right time in your life, for all the pieces of the puzzle to finally come together for you to have your own unique light bulb moment.

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Two Things

I like to think that my trading revolves around two things:

The first is that I have to see something that virtually nobody else sees.  To know something that not too many other people know about.  But this something that I see has to have the capacity and potential to make money.  I can’t just “see something.”  I need to “see something” that has the potential to make money.  There is a difference.  As a simple example, lets say a trend is very powerful and everyone is long the market, but I see something that tells me the trend is going to reverse, I can fade the trend and be a contrarian and make money.

Secondly, I notice things that other people also see, but that for a number of reasons, the other market participants do not take full advantage of.  I don’t always have to find a unique viewpoint to make money in the market.  Sometimes I can see the same thing, or a similar thing that other people see as well, and still make money.  As a simple example, lets say that there is a trend forming, and a lot of the market has caught on to it.  I do my analysis, and believe that the trend is robust and I will jump in an ride the trend.  Or perhaps I can time the entry better than most people into the trend.

That is the very basic gist of it.  Either I see something that nobody else or very few other people see, or, I see something that a lot of other people see as well, but I can still jump in to the market move and make money.

Ponder those two things.

Fundamental Analysis or Global Macro?

There was a time when I was confused about fundamental analysis in the forex market.  Various analysis and commentators would talk about trade deficits, balance of payments, etc.  I was so confused about how to apply fundamental analysis to the forex market.  Eventually I figured out that I didn’t have to do fundamental analysis on the currency market – I had to do what was called – Global Macro Analysis.

I don’t really care that much what the proper term is – even though I feel the proper term is called Global Macro.

If you learn global macro, truly learn it, then you can apply those insights not just to the currency market, but to trading other things as well.  You can use it to trade futures, commodities, and equities as well.  If you come from a strong global macro background, you can then expand into trading many different financial instruments.

After all, where the stock market goes, or where an individual company’s stock price moves, is not always dependent on the “fundamentals” of the company.  There are many times that it is heavily dependent on what the “global macro” situation is around the world.

Once you learn global macro, you can then choose to learn “fundamental analysis” of individual companies in the stock market, etc.  Fundamental analysis and value investing, and various other strategies for positioning yourself long the stock market, are a lot easier and far more effective, if you have a bullish “global macro environment” first.

That was one of the best things I ever did – get fairly good at global macro analysis.  Once you have those types of trading foundations, you can go wherever you want to go in the trading world.

I am not saying you can’t make money in fundamental analysis or technical analysis or anything else.  I don’t want to make such blanket statements since there are many ways to make money in the markets.  But what I will say from my own personal experience, is that the pieces of the puzzle for understanding the forex market didn’t really start coming together until I firmly understood global macro trading.

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