Archive for the ‘Markets’ Category
With the advancements in technology, the way of doing things has changed. What was once the “king of the market” is now a shell of it’s former glorious self and, sadly, fading with each passing year. In this segment of Floored, we see the floor trader’s challenges in the face of rapidly changing technology and the very hard decisions they have to make about an industry many love.
In this first excerpt from the documentary Floored we’re given a brief description of how this chaotic world works. What some of the challenges are and the allure of this very high stakes world. One of the best quotes from this excerpt, “It’s not what you make, it’s what you don’t lose.”
In 1997, 10,000 people traded on the floors…Today, about 10% remain. Thus begins James Allen Smith’s movie “Floored,” which will premiere on Futuresmag.com Sept. 6. As we see in this sometimes harrowing, occasionally funny, often sad documentary…
Many of the conversations that I’ve been having with traders lately centers around the inability of retail traders to understand what the market is doing. That translates into uncertainty about our individual positions in the market and what the average Joe Trader should be doing.
This situation, now more that ever, speaks to the importance of clarifying your reasons for being in the market and your reasons for being a trader. Since predictability is even less likely, understanding your decision process becomes more important when trying to decipher your portfolio questions.
And if you doubt me, listen to what the experts are saying. In an interview for the NYTimes’ DealBook, Larry Fink, CEO of BlackRock talks about the uncertainty regarding the market and how politics is playing a part. It’s personally comforting to know that even the “experts”, or at least those with more money than me, aren’t sure about what is going on.
I’ve been talking for quite some time that the purpose of trading isn’t about the money. When I say that I often get a look from traders akin to placing my head on the coffee table and continuing the conversation. Impressions aside, I’m on record having promoted this thought for a while. Money is Not The Focus of Trading, and my thoughts on Money Management are just a couple of the posting I’ve had on the subject.
The core of the issue isn’t that trading should be an academic exercise. We absolutely want to be profitable at this venture, even if for no other reason than to trade for another day. The issue is that 98.5% of coaching in the trading world is focused on only making money and less than 2% is on what motivates you to trade. Humans are very complex beings. We’ve evolved beyond the primal need of food, shelter and procreation to want happiness in our lives, to have a sense of purpose, fulfillment and satisfaction beyond the bottom line. Study after study has shown that humans need more than just the monetary reward.
To provide some evidence of this, I found a presentation from David Pink on his bestselling book Drive where he discusses some of the science around what motivates people in the work place. Even though his discussion relates to workers in organizations, the underlining information is valid for self-directed traders.
To paraphrase Mr. Pink, finding your purpose is key to your success in the markets. Most traders that I work with are pursuing trading as an avocation. Therefore, trading needs to fit into their lives and not the other way around. Defining the purpose of your trading is the first step in becoming a profitable trader.
As traders, making decisions is the crux of most trading dilemmas. When to get in the market, when to get out, how big of a position to take, where to take profit, and so on are just the few of the hundreds of decisions traders face. Add in a hint of insecurity or self-doubt and the anxiety produced can compound the number and intensity of the decisions.
It’s no wonder that traders are attracted by the claims of internet marketers in the trading world. The allure of better trading results is often the shiny object that traders are drawn to when frustration has them searching for new and improved methodologies or strategies. The caveat that marketers won’t tell you is that all strategies will fail at some point. Strategies are designed to take advantage of certain market conditions. When those conditions are absent, so are the winning trades. This over-analysis of decisions is often what leads to a new search and, more often than not, more frustration, more time wasted, and more money spent on new methods and more money lost in the market.
So what if we start taking back control of our decision process. Instead of buying, learning, and adapting to yet another trading strategy, why not adapt yourself to what you have in front of you right now. Change the way you think rather than spend money to have someone else tell you how to think. As humans we can get caught up in over thinking a decision, be that which peanut butter to purchase or which trading method to invest in. Lauren F. Friedman in Psychology Today writes in Pick One Already! that making decisions with more confidence and speed is a better option to brooding over a decision. I’m particularly fond of paragraphs Don’t Overthink and Stop Rationalizing.
In a similar vein, consider my earlier posting entitled, More Methods Does Not Mean More Profit.
When making your trading decisions this week, keep in mind that the Fed will be closely watched. This is a good time to ask if your trading decisions support or distract from your goals. If you don’t know what your trading goals are, this is a great time to ask the question.