As a beginner trader, I’ve spent over $20,000 on trading seminars, videos, books and courses. On top of that, I would also spend hours each day scouring though a variety of trading websites and discussion forums. Despite all this however, I struggled to turn a profit for years.

However, all that effort did not go to waste. For one thing, I got to examine and test a large variety of trading systems… and I can save you years of time and effort right now: the vast majority of trading “systems” out there can be summed up by one or more of the following points:

  • Buy when technical indicator does A, sell when technical indicator does B
  • Buy when you see X chart pattern, sell when you see Y chart pattern
  • Buy at support, sell at resistance
  • Buy upon break of resistance, sell upon break of support

This is the same mantra that gets repeated ad nauseam by the trading education industry. Pick up any “trading strategy” book or visit any trading website, and you’re likely to find some variation of the above four points. I’ve seen these “strategies” being mindlessly regurgitated for a decade now.

So… what’s the problem?

In a game of poker, the cards in your hand are not the sole determinant of whether you’ll win. You’d also have to be able to guess if your opponent is bluffing, and whether you can get away with some bluffing of your own. Ultimately, you’ll have to estimate your opponents’ cards and intentions.

In other words, the game of poker isn’t just about knowing the statistics of the game. It’s also (and I would argue, largely) about understanding how the guy sitting across the table from you, thinks.

Now consider that trading is essentially a global game of poker between traders. If you know that the majority of traders are looking to buy the EUR/USD, what should you do?

Well, for one thing, you should buy before they do! This way, your trade will be pushed into profit by their buying action.

This, is the nature of trading profits. You can only make money if you can predict in advance, the actions of other traders.

Now if you put two and two together, the logical conclusion is that you don’t want to be trading in a predictable way. Because if you do, it’ll be easy for other traders to predict your actions in advance, and make a profit at your expense.

So if you’ve learned to trade like this:

  • Buy when technical indicator does A, sell when technical indicator does B
  • Buy when you see X chart pattern, sell when you see Y chart pattern
  • Buy at support, sell at resistance
  • Buy upon break of resistance, sell upon break of support

… then you might want to re-evaluate your approach.

Why?

Because this is how most retail traders have learned to trade. It’s entirely predictable.

Think about this. If everyone has learned to trade in similar ways, who would they be making money off of? If everyone is “buying at support”, who is selling to them?

Even if you don’t question the validity of common technical indicators and chart patterns, the fact that the majority of retail traders use them is a big warning sign in itself.

As Warren Buffett said, “If you don’t know who the patsy is, you’re the patsy.”