Trading As Endeavor
Trading has been around for ages, specifically The New York Stock Exchange opened their doors 1792 (!). Don´t worry, this section isn´t going to turn into a history lesson. This section is more about dismantling some of the known narratives, actual limitations and logic that drives trading.
The core of trading
The idea is a simple one, and it hasn´t changed for hundreds of years. We seek to buy something at a price and sell it later on at a higher price. That´s it. But how we achieve this is the real challenge.
One of the first things to understand about trading, is that participating in trading isn´t much different than participating in any other endeavor. There are many ways we engange in endeavors, due to us having different goals. Let´s use exercise as an example:
- We engage in exercise/trading for vastly different reasons and with equally different goals.
- Not all who exercise/trade become pro athletes/traders, or even seek to become one.
- To become a pro athlete/trader there´s some physical/financial obstacles we must first pass, whether we like it or not.
The difference here is that the financial obstacles can be erased over time. - The outcome is highly dependent on the level of commitment. Cliché, but true in trading as well.
- Even recreational exercise/trading demand a entry level of gear/tools and knowledge.
Your first thought before engaging in trading is to ask yourself what your goal is.
The answer will guide you in how much effort will be needed to achieve this goal of yours. And it´s often a ladder, higher goals require higher commitment and knowledge. Short cuts in trading will have a high degree of failure, just like in any other endevaor…
Is trading a fast track to riches?
Short answer, no. Doesn´t mean it can´t be, but realistically we should have the same expectations as in other endeavor.
It takes time to evolve and see results.
Realistic expectations and analytics, will win the race.
Is trading only for those with a Phd?
Absolutely not. Trading doesn´t demand you to be a math prodigy or have a Phd in science.
Participating in markets and trading is “simple”. But the simplicity can sometimes be deceptive. Participation in something can be simple, but to be successful is a different thing.
With basic knowledge about why and how markets move, a set of chart tools and you´re already on the path to become more self-propelled.
Do I need advanced technical gadgets?
No. To start trading you will need a computer or smart phone, a broker account at a recognized broker.
Add charts and indicators into the mix and you´re already way ahead.
And they don´t need to cost you a fortune, and shouldn´t.
Is trading only for those already wealthy?
No. But there are capital limitations to be aware of though. Smaller capital will require you to engange in the most difficult trading style there is, single position trading.
Meaning you put your whole thesis on the line when opening a position.
More advanced safety nets like hedging, scaling in and out of a position, counter trades and so on do all require greater capital.
The initial capital is a hard constraint, but it can be dismantled over time as captial (hopefully) grows.
How much capital do I need?
Most regulated and recognized brokers have a minimum amount needed.
But the real question isn´t how much capital do I need to start, it´s how much can I afford to lose. It´s stated many times, but it´s a important one… “don´t use capital you can´t afford to lose”. As there are no guarantees in markets.
And no, the narrative about “markets always goes up” is a human construct that relies on inaccessible historical participation.
What does the charts tell you?
The charts is simply a historical map of how price moved.
There´s no information on why it moved like it did. There´s no heading back and cleaning up human errors like fat finger orders. There´s no cleaning of price behaving to false infomation. They are all there. And will always be there in the historical map and contaminating calculations.
But using charts and indicators will aid you in observing market behavior and a better understanding. You will be recognizing patterns. Patterns and behaviors one can use to ones own advantage.
Charts always depicting truth?
The charts do show real math that we can calculate on. We can make precise estimations. Build models to analyze it in detail.
But this doesn´t mean we always can predict the outcome ahead…
Markets is a adversarial game involving advanced strategies and deception, by those of great size.
Or markets would simply stall and cease to exist…
