In trading, as in life, the keys to success are rarely obvious.
But pay close attention and sooner or later you’ll notice patterns that over time, start to make sense.
Now I won’t pretend to have all the answers, but after almost 14 years as a retail Forex trader, these are 3 trading paradoxes I’ve found to be true:
Paradox #1: The more you need to make money, the more you won’t
As with any financially-rewarding pursuit, there will always be people who are drawn to trading when they have few other options.
Typically, these are people who have lost their jobs and need to make money quickly.
Unfortunately for them, trading is one of the worst things they can do because financial markets thrive on the tears of desperate participants.
When you’re desperate for cash, your thoughts and actions are driven by emotions rather than logic. And that’s fatal in trading.
As the saying goes, “If you can’t afford to lose, you can’t afford to win”.
The harder you push for trading profits, the more they will elude you.
Paradox #2: The more mistakes you make, the more likely you’ll succeed
There is one caveat to this: you must learn from your mistakes.
Success with trading is inevitable (I repeat: inevitable), as long as you don’t blow up your account or give up.
And despite what some slick online marketer will tell you, the only way to do well in this business is to practice.
Instead of paying $5,000 for a feel-good trading seminar, fund a mini trading account with that money and start gaining real-life experience.
Make one mistake, write it down, and don’t do it again. Rinse and repeat. I promise that you’ll learn a lot more from these experiences than at any “guru” trading seminar.
Make enough mistakes (and learn from them), and you’ll start making money. It’s that simple.
Paradox #3: The more you’re convinced you’re right, the less you probably know
“The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence.” ― Charles Bukowski
Despite what some people might say, trading is not a science.
And neither is economics.
Unlike the physical sciences, there are simply too many unknowns in financial markets to have a high degree of confidence in predicting future prices.
We can understand the laws of physics precisely enough to send a rocket to Mars, but we can’t predict tomorrow’s market prices with anywhere close to the same level of accuracy.
Why?
Because while we can rely on the laws of physics to remain constant, we can’t say the same for peoples’ thoughts, moods and actions, which are essentially what drive markets.
The best retail traders understand that no matter how thorough their analysis, there is still a lot they don’t – and can’t – know about the market.
Thus, they adopt trading methods that maximizes profits when they are “lucky”, while minimizing losses when they aren’t.
In trading, as in life, certainty is often just an illusion.
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What do you think of these 3 trading paradoxes? Let me know in the comments below!
I agree with all three points. However, I beg to differ on your opinion that Economics isn’t science. I think it is, otherwise economically strong nations like America wouldn’t have gotten to where it is without the inputs and predictions of it’s economic experts. Sure economists may not always be right all of the time since they have to predict human behavior in relation to scarce resources. But they’re right most of the time I believe.
Yes I could definitely have phrased that better, thanks for the input!
Actually, I think Chris phrased it just right. Economics is not a science. I “know” this as my academic background is in economics and econometrics. I threw 5 years of economics study out the window in my first month as a Bank trader many years ago. A country’s economic strength is due to economic activity which happens INSPITE of advice from so-called economics experts. All economists are ever good for is bollocks-ing up everything.