Sunday, August 14, 2011

Tao, photography and trading

So, being a trader, a photographer and a student of Taoism, what am I to do when I run into the (excellent) book named Tao of Photography? Why, look for analogies with trading of course. I mean, two of the components are there, gotta look for the third. Didn't take too long to see the similarities in how Tom Ang applies Taoist principles to photography and I - to trading. Read on:

"The technique of the wise is ever-present, but never evident... Technique empowers the individual but it does not dominate. It must be learned and absorbed via a process of long training, but then falls from consciousness. The aim of technique is to provide fluency - an unbroken movement flowing from thought and conception through to production..."

Sounds familiar? It should. Automatic reactions on whatever market does - reactions seemingly so instant as if events were foreseen... that's how experienced trader's actions look to a side observer. Did he really foresee sudden news that just hot the marketplace? Of course not - it's years of training that instilled this ability to react instantly and unconsciously. Re-read this description of the third stage of trader's development, and you will see the same motives.  Re-read this post about gunslinger in Stephen King's novel, applying templates to be ready to any development (If - Then scenarios for traders?) Remember my often-said motto: "Trading is simple, but it is through many complications that you arrive to this simplicity." Finally, our trading room members will remember the slogan they see when enter the room: Don't interrupt your brain's work by thinking.

Saturday, August 6, 2011


I know I've written about this a few times in the past. But it seems never enough.

Considering the market over the last few sessions and panic over last two, I thought it was high time to scream it out loud once again. DO NOT guess on the bottom. What you think is low today can seem awfully high tomorrow. Selloffs can and do go for much longer than the "common sense" indicates. So do euphoric spikes for that matter. Premature bet on reversal will cost you dearly; correct guess will still be just that, lucky guess. NO ONE ever was able to pick exact reversal points consistently. Attempts to nail exact reversal is second most common reason for traders demise. Oversold gets oversolder, then oversoldest, and then sells some more before reversing.

Bottom line: if you want to trade reversal, trade it on the RIGHT side of the reversal - AFTER it happened, price retested the low and confirmed the strength. Trading it on the left side is a childish bravery - cemetery of traders' accounts is sprinkled with tombstones saying "He was a brave trader."

Disclaimer: this warning will be ignored by majority, just like 1000 similar warnings before. If you, a single reader of this - yes, you - heed it and play it right, that's all reward I count on. If there are two of you, I accomplished a lot today.