Real Traders Are Independent Thinkers

Larry learns about a new trading system from a popular Forex trading website.

The website says, “When you see signals A and B, buy. When you see signals C and D, sell.”

Excited, Larry opens up his charts and scans through the historical market price movements, as he mentally “backtests” this new system.

An hour later, his eyes light up.

“Wow… I could make money with this!” he exclaims, quietly to himself of course. (No one else must learn of this secret method.)

“This would get me about 50 pips a week… multiplied by 4 weeks… that’s 200 pips a month!”

“And if I trade with just two standard lots, I could make $4,000 a month…” his eyes widen.

“I could quit my job and trade from home!”

Not wanting to waste another moment, Larry promptly funds his live trading account with $10,000 of his savings.

The Journey Begins

Over the next two days, Larry dutifully applies his new trading system. He watches the market carefully for signals A, B, C and D.

Suddenly, he finds what he’s looking for.

“That’s signal A and B!” he sits up. It’s game time.

Checking one last time to make sure there is no mistake, Larry clicks the ‘Buy’ button on his trading platform. “Here we go!”

Two hours later, Larry hears the sweetest sound he’s heard in a long time. “Ding!” The trade had just been closed for a $800 profit.

Larry could barely contain his excitement.

“This is IT!!”

This is what he had been searching for. This is going to change his life forever!

Fast Forward 6 Weeks Later

..

.

Larry is getting increasingly annoyed.

His trading account hovers near $6,300 and he’s losing patience.

“I don’t think this is for me…” he thinks to himself, feeling somewhat frustrated.

Tired of waiting for yet another signal that might or might not work, Larry opens up his web browser and goes back to the Forex website.

“Let’s see if I can find a better trading system.”

— The End —

Larry Lives In All Of Us

Larry’s story may have struck a chord… after all, his experience is not unique. Most retail traders would have gone through something similar at one point or another.

We learn about a new trading system from a website, book or seminar, and apply it with the best intentions. Almost invariably, we end up losing a significant portion of our capital.

Faced with such a frustrating experience, most people just quit trading altogether. And indeed, that’s probably the smartest thing they’ve done since getting into this business.

You see… unlike what some marketers may claim, trading really isn’t for everyone.

For one thing, it’s not for people who just want to “follow instructions and make money”.

That’s called “having a job”.

Instead, successful traders must think like an entrepreneur. It’s about learning, reflecting, planning, testing and monitoring, all at the same time. There are no instruction manuals or checklists that will automatically turn you into a successful trader.

Mentorship and guidance can ease the learning curve, sure. But long term success ultimately depends on the trader’s ability to think rationally, realistically and independently.

An Independent Thinker Speaks With A Trading Guru

Guru: “Buy when the fast moving average crosses the slow moving average.”
Independent Thinker: “Why?”

G: “Because it means that the price momentum is picking up.”
IT: “Does that mean that the momentum will continue on, after I buy?”

G: “Hmm… not necessarily.”
IT: “Then, why should I buy now?”

G: “Well… this method has worked 70% of the time in the past.”
IT: “So… the only reason you are telling me to buy now, is that it USED to work 70% of the time, in the past. And you are telling me to bet that it will continue working in the future.”

G: “Yes, that’s a fair statement.”
IT: “And what is the basis of believing that this system will continue working in the future?”

G: “You are thinking to much. The important thing is to make money first, and question later.”
IT: “Sorry, but I disagree. Based on that logic I can be trying all sorts of trading systems and waste years of my life without getting anywhere. My priority is not to make money right now, because even a dart-throwing monkey can do that. My priority is to learn how to think and act as an independent trader so I can keep making money in the long run.”

G: “Well… why don’t you just try out this system and see for yourself.”
IT: “No thanks. I’m seriously concerned that this is the sort of advice you’re giving your followers. Instead of teaching them to think for themselves, you’re teaching them to blindly follow instructions. I am not an expert, but I can’t imagine this is how real traders think and behave.”

The Truth Behind The Learn-To-Trade Industry

To be fair, many trading “gurus” provide fixed trading instructions because that’s what the trading education market demands. Most people prefer to learn tactics over fundamentals, because it’s simpler and more exciting to think and talk about.

And whenever there’s sufficient demand for something, supply will rise to meet it.

This quickly becomes a cycle of:

  1. Wannabe traders demand superficial trading tactics
  2. Trading “gurus” provide exactly that. They come up with an exciting product launch and get the audience whipped up into a buying frenzy.
  3. Wannabe traders buy the “trading system”, in hopes of making money quickly. The “guru” turns out to be the only one who gets rich from this arrangement.
  4. The wannabes apply the “trading system”, lose money and get discouraged. Some quit, while others look for a new magic bullet.
  5. The same gurus start a new website, sell a new course, and put a new face on the package. Soon, a new product launch is announced.
  6. The wannabes continue to look for superficial tactics and buy the new product.

This is the ugly truth behind the trading education industry. I should know — I’d been invited to be a part of it.

Reality Bites

The ugly truth is that there are significant conflicts of interest in the retail trading industry.

Brokers want us to trade as often as possible, and the gurus want us to keep buying their latest products that cannot possibly work in the long run.

The reality of the situation is that they’re looking after their own interests at the expense of the people they claim to be helping.

For example, I find it ridiculous that people are learning how to trade from brokers that make money when they lose. That’s like learning how to guard the hen house from a fox.

And yet people do it every day, often with no idea that this is happening.

Another example: Do you frequent the Forex Factory forums?

Ever notice whose advertisements are supporting the site?

Take a look for yourself: http://www.forexfactory.com

As the saying goes: Free advice is usually the most expensive advice.

Don’t Let Someone Else Do Your Thinking For You

All truly profitable traders are independent thinkers, without exception.

This doesn’t mean that we can’t learn from others. It just means that we shouldn’t accept everything that’s presented to us without question.

Beware Of Conflicts Of Interest

In 2006 many people in the U.S. believed that housing prices would never go down.

Instead of questioning this premise, an entire sub-prime mortgage industry was built upon this idea.

Of course, there were plenty of people who saw through the illusion, including the investment banks that made a lot of money marketing that illusion.

In the end, those who blindly listened to the “experts” were left holding the bag of worthless mortgage derivatives.

Whose fault was this?

Was it the banker who knowingly sold worthless mortgages?

Or was it the fault of of the buyer, who trusted the fox to guard the hen house?

Among these two parties, only one was thinking for himself.

Take Back Control Of Your Trading

Now think about your trading approach. Have you questioned the premise behind it?

Why should it work? What is it really based on?

Do you understand its philosophy? Or have you just copied parts of someone else’s system?

Let Me Know Your Thoughts (In The Comments Below)

This post took me longer than usual to write, mostly because it upset me.

Nobody likes to be a wet blanket, but I feel this topic is too important to be left unsaid.

What do you think? Have I been overly critical?

Let me know in the comments below.

By |2019-03-23T21:45:07+00:00March 23rd, 2019|Mindset, Philosophy|29 Comments

29 Comments

  1. kpchan November 3, 2014 at 10:43 am - Reply

    no need to waste time in separating the story in such short parts !

    • Chris November 3, 2014 at 10:56 am - Reply

      You’re absolutely right. I’ve edited the post and included the final portion.

      Thanks for the feedback!

  2. James November 3, 2014 at 1:21 pm - Reply

    I agree Chris. We need to think independently, and open our minds. I’ve done much better at trading after a long break. Now I have coem back, forgotten any ‘systems’ and can See the the market for the first time.

    • Chris November 3, 2014 at 10:39 pm - Reply

      Yeah, it really helps to walk away first and come back later when we’re clear-headed.

  3. Guy November 3, 2014 at 5:44 pm - Reply

    A casino lets you win a couple of times to hook you in. Then disaster.

  4. John Withey November 3, 2014 at 10:07 pm - Reply

    You really nailed it! If I weren’t so stubborn, I would have stopped trading long ago, but it is a challenge which I enjoy and I am only using “play” money. Slightly off track, the behavior of the stock markets over the last couple of weeks has been ridiculous – sentiment or manipulation!

  5. Ken Bolland November 3, 2014 at 11:33 pm - Reply

    Xie xie ni, terima kasih, thank you very much for this post. I’m going to save it and read it again and again for years. This is outstanding, even for you – your posts are invaluable. I look forward to them.

    • Chris November 4, 2014 at 8:16 am - Reply

      Glad this post was helpful, Ken.

  6. Kevin (TDT) Harper November 4, 2014 at 7:07 am - Reply

    Good one again Chris
    There is no doubt in my mind that the thinking / mental / psychological part of trading is the most important part and it is not dealt with by most System Pushers to anywhere near the extent it should be.
    To be honest it is most probably beyond most of them to do a decent job of teaching so they are most probably better of not trying

    This is a very big, very important subject that is Sooooo .. important to determine regarding how an individual fits into the Trading arena.

  7. santo November 5, 2014 at 2:54 am - Reply

    Thanks for posting, Chris!
    Yess, I agree with you about free advice is usually the most expensive advice. We doing the trading business just because we are an entrepreneur, not only a guy that wannabe a “work-from-home” trader.

    I was blow up my trading account last year, and today I am enjoy the fruit of trading business as an independent thinker as you said in this post.

    Actually, I grow up with your blogpost Chris. May God bless you, mate. 😀
    Keep posting!

    • Chris November 5, 2014 at 2:13 pm - Reply

      Cheers. 🙂

  8. Terry November 6, 2014 at 1:55 pm - Reply

    Good post Chris,
    I have been guilty of not getting “educated” properly about trading and because of time constraints have looked for easy “plug and play” methods without trying to understand “why” I should trade like someone or some system says I should. I have since realized that I need to “understand” what I am doing before I can trade properly and make money from it consistantly. Even if/when I lose I will at least understand “why” I did and then learn from it for the next time. I really liked your dialogue with the Guru! Priceless and so educational….. entertaining as well! 🙂 Keep up the good work my man. Salute, Terry

  9. Paul odibeli November 7, 2014 at 11:07 am - Reply

    The truth about forex is what i have learnt from chris. The prices represented by the candlesticks,is where the truth is. Hold on to chris posts,buy & believe in whatever he says. That’s THE TRUTH!!!. Thanks chris,keep up the good works.God bless you

  10. Sher November 21, 2014 at 10:16 pm - Reply

    Thank you, Chris, for your valuable advice and spot on insights. Enjoy reading your posts. In my opinion, you’re the BEST!

    • Chris November 25, 2014 at 2:49 pm - Reply

      Hey Sherron, thanks! I appreciate you taking the time to share your comment.

  11. Krek Krekel December 4, 2014 at 10:43 am - Reply

    Chris you always produce blogs that are thought provoking and inspiring. This one was like looking in a mirror. I am the only person that can change the image in my mirror. Thanks for shinning a bright enough light to see the mirror in the first place. Thanks for your insights.

    • Chris December 4, 2014 at 11:44 am - Reply

      Thank you Krek, glad you like the post.

  12. king February 17, 2015 at 8:13 pm - Reply

    hi Chris
    all this hit home to me, but where do you go to get all the necessary info needed to be well in formed on the market at all times, i became interested in fx trading meany year ago ,and have not gained 1/4 of the skills necessary to even think about entering the real market, technical analysis is one, even me can understand that that alone will not be enough but chris where do i go ?

    • Chris February 18, 2015 at 8:26 am - Reply

      Hi King,

      One way to do it is through trial and error, and LOTS of thinking, correction and reflection.
      This option will take time and effort, but will largely be free (not taking into account the capital lost through the making of and learning from mistakes).

      Another way to do it is to just join my trading course: The Icarus Project.
      This option requires a monetary investment, but will shortcut the time and effort required to get the understanding you’ll need.

  13. Bledi January 16, 2017 at 9:50 pm - Reply

    I’ve been reading many of your post and I see one common thing in them which is, be sceptical on everything as it is not the way it looks, everyone is speculating etc, similar kind of thinking. And the more I read the more I keep being sceptical of what is right and what is wrong..and other questions come to my mind: why is Chris helping us, why is he spending his time with us, why is he showing us all the ‘tricks’ in the trading? And I keep being more sceptical.. judging from the same logic of above story of course.

    • Chris Lee January 17, 2017 at 5:30 am - Reply

      Skepticism (especially on the internet) is healthy. I’m glad to have helped nudge you in that direction.

      There are a few reasons why I spend time writing these articles, and perhaps this would be a good topic to write about next time if there is sufficient interest from readers.

  14. dibya ranjan routray January 29, 2017 at 6:45 pm - Reply

    Ya I agree on this…but this upsets me…but at least u made me understand what not to do to lose money in this market… But what should be my approach towards the market to make money in the long run? I m not asking for a trading system. What I àm asking is, what do u do to make money in this market? How do you know when u should buy or sell, or when should u cut your loss or book your profit…? Plz answer me, bcoz I m hopeless now…

    • Chris Lee January 31, 2017 at 7:20 am - Reply

      Hi Dibya, getting upset is actually the first step. Realize that you are only experiencing this because you now understand something that most other (losing) traders are totally ignorant of. The sense of hopeless is natural and will fade with time. In fact, the “lost” feeling is the blank slate you need to start seeing the market with new eyes.

      From here, there are two options: learn from an experienced mentor (quick but expensive) or learn from trial and error (slow but free).

      • dibya ranjan routray February 1, 2017 at 7:16 pm - Reply

        I prefer the second option, bcoz I can’t trust anybody except myself…yes if u can teach me something that will be completely different…awaiting your answer… Dibya

        • Chris Lee February 2, 2017 at 1:59 am - Reply

          Apologies my friend, I do not do any private coaching at the moment.

          • dibya February 2, 2017 at 7:04 am - Reply

            It’s fine sir…your book taught me more than anything.. Thanks

  15. Rupert August 29, 2017 at 1:16 pm - Reply

    Hi Chris. This actually remind me how i lost my money,when i started 2 months ago. Jumping into all these trading signals from the “broker”. I got so frustrated and angry, cz they sell the idea with their signal app, we will make some profits. The signals i figured is never promising. Instead whatever i buy/sell went the opposite direction. This broker knows about all the new traders since they still promoting their company. With this said they dont even give the guys a time of entry more or less. they speak forex language that the new traders dont understand(unless uve been attending advance classes). Out of my frustration and anger i wrote them an email to say, that i dont trust them and they appear suspicious because of the false and unreliable signals they give us. And i was emphasising on the person who sent out those signals. He/She replied that it is up to me if i wanna take the signal or not..Lmao. so my question is..why do they have a signal app in the 1st place. I think they selling a lie to the people who has interst in making money fast though.

    Long story short. When ive read your book on candlesticks made easy. I realised how much sense it makes (past and future price movements)when it comes to that false signals that was send to us new traders. And you right, because of my trust issues with my broker, i will always look at the signal first, HAVING YOUR CANDLESTICK BEHAVIOUR KNOWLEDGE in mind hehehehehe,Before i even consider taking those signals.

    You are right. This made me to think on my own and make my own decisions. So for now i follow my own judgement with micro lots and monitor whats happening.

    Thanx for the article 🙂

    • Chris Lee September 9, 2017 at 3:13 pm - Reply

      Hey Rupert, spot on!
      Thanks for reading the book, I’m glad you found it to be useful. 🙂

  16. Andy January 8, 2018 at 6:32 pm - Reply

    the best way to go is reading price chart without indicators i’ve learning a lot from you and nail fuller.

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