Analysis, success or failure hinges critically on the ability to penetrate the ‘emotional gateway’ between the generation of a ‘buy’ or ‘sell’ signal and the implementation of that signal. Penetrating this gateway is, in essence,small adjustments in understandings, attitudes and responses, so that a large number of successful decisions can be made on a continuous basis.Such a commitment encourages flexibility, without which we cannot respond effectively to unexpected information.
All that matters is that you have aligned yourself with the actual market trend, and if this involves changing your investment position, your belief system or even your drinking companions, then so be it.
Tuesday, March 31, 2009
Making Money By Trading In Financial Markets
Making money by trading in financial markets is a formidable task.This is a great truth that is almost impossible for one person to teach toanother. It can only be realized by the very act of trading.
People approach markets in the same way that they might approach a lake containing a fabled
treasure. They feel that all they have to do is set up appropriate pumping equipment and the treasure is theirs.The problem is that there is an energy in financial markets (and, indeed, in economic activity) that somehow coerces and organizes investors into a single-minded unit. There is nothing sinister in this: it is just nature ‘doing its thing’.Investors do not recognize it until they
are finally caught in a disastrous bear market that wipes out months, if not years, of hard work.
The reality is that successful trading requires a certain psychological competence to do the job and, unfortunately, nature has chosen not to wire up the human psyche with automatic access to this competence. The point here is that financial markets can have a direct and dramatic effect on wealth and on associated living standards.
When a system generates a buy or sell signal, the investor will still feel obliged to decide whether or not to implement that signal. Investment thereby moves away from the objective realm and into the subjective realm.
People approach markets in the same way that they might approach a lake containing a fabled
treasure. They feel that all they have to do is set up appropriate pumping equipment and the treasure is theirs.The problem is that there is an energy in financial markets (and, indeed, in economic activity) that somehow coerces and organizes investors into a single-minded unit. There is nothing sinister in this: it is just nature ‘doing its thing’.Investors do not recognize it until they
are finally caught in a disastrous bear market that wipes out months, if not years, of hard work.
The reality is that successful trading requires a certain psychological competence to do the job and, unfortunately, nature has chosen not to wire up the human psyche with automatic access to this competence. The point here is that financial markets can have a direct and dramatic effect on wealth and on associated living standards.
When a system generates a buy or sell signal, the investor will still feel obliged to decide whether or not to implement that signal. Investment thereby moves away from the objective realm and into the subjective realm.
Getting Started
The last two decades have witnessed dramatic changes in the
behaviour of the free world’s financial markets. The fundamental
causes of these changes must embrace both the end of fixed exchange
rates in the early 1970s and the progressive removal of controls on
international financial flows. However, whatever the precise reasons
may be, the symptoms are evident:
a very marked increase in the volatility of prices and volumes in
most markets;
sharp and growing clashes between short-term developments and
long-term trends;
striking contradictions between market sentiment and economic
fundamentals.
The practical consequences have sometimes daunting and sometimes
humiliating challenges for forecasters but, far more importantly,
much greater risk and uncertainty for businesspeople and traders.
behaviour of the free world’s financial markets. The fundamental
causes of these changes must embrace both the end of fixed exchange
rates in the early 1970s and the progressive removal of controls on
international financial flows. However, whatever the precise reasons
may be, the symptoms are evident:
a very marked increase in the volatility of prices and volumes in
most markets;
sharp and growing clashes between short-term developments and
long-term trends;
striking contradictions between market sentiment and economic
fundamentals.
The practical consequences have sometimes daunting and sometimes
humiliating challenges for forecasters but, far more importantly,
much greater risk and uncertainty for businesspeople and traders.
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