By Jay Norris
The holidays are an ideal time to assess your strengths and weaknesses as a trader. As a market strategist, and customer man, as a lot of the old timers call me, it is part of my job to help my clients assess those qualities or drawbacks. That information is not something I can ever share, because, much like information shared with the clergy in the confessional, it is private. I can, however, speak for myself. I'm in a funny position as a strategist in that I'm expected to have an opinion on the markets, yet I'll be the first one to admit that if an opinion does make its way into my conscious thought process, I put very little weight on it. This is because, thankfully, I've been trained to only act on specific signals or triggers and not on my own lesser-grounded observations and assessments. I put all the weight on the pattern of highs and lows and current direction, and virtually none on the opinions of market experts and myself.
I remember seeing the movie Moonstruck and initially being baffled by the character played by Olympia Dukakis advising the character played by Cher. In the beginning the mother asked the daughter if she loved her fiance. The daughter thought for a moment and said, No Ma...I don't love him. The mother nodded and said Good. Marry him. Later in the movie after Cher's character fell in love with the brother of her fiance, played by Nick Cage, and the mother asked her again, Do you love him? Cher responded, Yeah, Ma. I love him! The mother said God help you, and started crying. The mother had learned the hard way that attachment and unconditional beliefs create a recipe for potential sadness. Now that scene may or may not be a realistic assessment of an emotional situation, but there is a GREAT lesson in it for traders. Attachments, and the emotions they evoke, can make for nearly impossible conditions to trade through successfully. The age old saying: Lose your opinion, not your money cannot be overstated.
The first time I heard Bill Williams, author of Trading Chaos (Second Edition, Wiley 2004) say, Even if you are already in a trade, you should not care which way the markets moves, I thought that was crazy! That is how ignorant I was. But what Bill was saying was true. What Bill was pointing out, to those who know how to listen, is that there is no room for attachment when it comes to successful trading. If you are long, and the market goes lower, you should not care because you should have confidence that if the market is going to continue to trade lower, your method will get you out and then short, and that through time your winners will make more than your losers, which are an expense. Of course, this assumes that you have a sound methodology, which should not be in question because you should have first back-tested it, and next demo traded it for a sufficient period to have the confidence necessary to trade it live. Once you get to that point where you don't care which way the market moves, you will have left a lot of the emotional baggage of trading behind, and be confident that you are in a position to take it to the next level.
Of course it cannot be stated enough that the environment which you trade in is important too. As was proven in Trading Places with Eddie Murphy and Dan Akroyd, environment trumps pedigree.
As always, if you have any questions regarding anything trading related, give me a call or shoot me an e-mail.
Happy Holidays All!
John Jay Norris
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and may not be suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as spread or straddle trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.