the crowd. You may notice that your stress is reflected in your physical condition. At such moments, make it a rule never to act. Pause. Take afew slow, deep breaths. And look away from the market. Go for a walk if you can, and empty your mind. Look at the trees in the park and at the sky and the pigeons or whatever. Then, when the adult computer in you is ready to takeover, re– examine the reasons for your position. Remember: the right decision is just a probability –a 51/49 shot or better. If you keep on following the probability , you will be doing the right thing.
If you should happen to be interviewing someone fora job, here’s a tip. Ask them, out of the blue, if they are lucky? Winners believe they are lucky –so the theory goes. What role does luck play in trading? Ed Seykota said this: “Luck plays an enormous role in trading success. Some people were lucky enough to be born smart while others were even smarter and got born lucky… ‘Luck’ or ‘smarts’ or ‘gift’ are words indicating an attitudinal proclivity for mastery.”
Jesse Livermore frequently noted that when he was trading well he also seemed to get lucky. So have many others, in many different fields. The Roman word felix meant both happy and lucky, which may be what we mean by “happy-go-lucky.” Luck comes along with the transformation from being a loser.
Are you jealous of wizard traders?
My own answer is “you bet I am!”. But I’m working on it. Peter Steidlmayer is categorical: “You can’t be a jealous person. A jealous person has a very hard time succeeding. He’s always reacting and not thinking. In other words, making emotional decisions. A good trader is not affected when someone’s doing better than he is.” Steidlmayer sees generosity towards your fellow man as the first requisite of a great trader. What does he mean?
It goes back to his analysis of what determines results in trading, namely: your market understanding; your trading strategy; and you. “You” is something you have to know, says PS. “You have to be you” and you have to work within your capacity. That means sticking to the position size, time-frames and method with which you are comfortable. And doing these things obviously has nothing to do with anyone else, so comparisons are unhelpful and could be seriously damaging. Indeed, wise traders sometimes say there is no such thing as a good method or a bad method; there are only methods that suit you and methods that don’t suit you. Which leads on to other things like independence and taking responsibility for the trade, which are
hallmarks of the successful trader –and of the Adult in us. And of the winner: it’s the loser, remember, who says “If only…”. Perhaps that’s also part of what Steidlmayer meant.
Currency Bulletin’s method for analysing the currency markets rests on age– old principles. It assumes that the big money is made in the big swings: but you cannot make big money out of the big swings unless you are confident about the direction of the swing. Big swings are regularly interrupted by counter-trend corrections, which challenge our confidence. Since we do not know in advance whether a counter- trend movement is a correction or a complete reversal, it follows that we can only trade the main trend with confidence if we have a method for locating and monitoring all major counter-trend movements. The one thing that all changes in price trend have in common is a change in sentiment among participants. CB’s method provides a systematic way of determining the main trend, its corrections, and its reversal.
The method is only one third of the winning formula: the rest is you. The method works. If you follow it, you will usually hit the target. You will sometimes miss. That’s OK. All you have to do to win over time is to shoot.
Don’t worry about hitting or missing. When you know it’s the right thing to do, whatever the crowd is saying, just shoot. That’s the winning formula.
NOTE: Terms elaborated in the glossary are in bold type. So if you see bold type in the text you are invited to look up the entry in its alphabetic
sequence. The numerals after each entry refer to the page number where the subject is first mentioned – or where it is dealt with in depth. A short-list of highly recommended books will be found on the last page.
Arbitrage 39,93 . To arbitrage is to undertake a trade with little or no risk, by simultaneously buying and selling different forms of the same risk: for example buying a forward currency and selling a future at similar maturity (see EFP )– or borrowing a currency and selling it forward at the same time. Used as a noun, this is an arbitrage.
At-the-money 96 . The right to buy or sell and option is available at a specific price, some-times called the strike price. When the strike price is close to the going market price, it is “at-the-market”. When it’s on the profit side, it’s “in-the-market”; when it’s on the loss side, it’s “out-of-the-market”. See also Strike price.
Bear (ish). a would-be seller – opposite of bull (ish).
Berne, eric 111 . Eminent psychiatrist of the psychoanalysis school of Freud and Adler; founder of the school of Transactional Analysis ; and author of several influential books including Transactional Analysis in Psychotherapy (Souvenir Press, ISBN 0 285 64776 8), and best-sellers Games People Play (Penguin, ISBN 0 1400 2768 8) and What Do You Say After You Say Hello (see book list).
