Does it ever feel like there’s someone in your monitor watching your every move and trading the other side of the market, making your trades fail?
I’ve had many students make that comment.
Some of them were pretty serious and actually accused their brokers of trading against them. I had one student send me a copy of a document from a broker that stated that they may indeed take the opposite side of a position he has. He sent me a copy of a scathing letter he sent them accusing them of doing just that to purposefully profit from his losses.
I know it may feel that way sometimes, but I don’t think anyone’s broker is all that interested in a newbie’s $20,000 trading account. Sorry, it just doesn’t really hold much interest for them.
Still, it cannot be denied that it is often UNCANNY how the market seems to do the exact opposite of our trades … over and over!
- It does feel like it’s intentional.
- It’s so consistent that it really seems there’s someone watching us.
- It feels like there’s a real intelligence trading against us. It can’t be chance.
OK, the truth is that it isn’t chance.
The truth is that there truly is an intelligence trading against us.
But it’s not what you think.
It’s no one trader or trading firm.
And no, though it may feel like it, it’s not the devil.
It’s the collective intelligence of the market. In other words, it’s the mass consciousness. In lay terms, it’s the masses.
The markets move based on the principles of mass psychology.
In trading, a small number of people make a lot of money and the masses lose.
So to be profitable, you must be one of the small minority.
Now here’s a mind twister for you:
Do you think you will be one of the few who can be better than the rest?
If you do, then congratulations … you lose!
Because the majority of traders believe they will be part of the minority – the winners. So simply by saying you will join the minority, you are expressing the feelings of the majority and have established yourself solidly in the camp of the mass psychology!
Ouch. My brain hurts now.
So what’s the alternative? To think you will be a loser?
Ironically, in a matter of speaking, yes.
Most traders go into the market thinking trading is easier than it is, are under-capitalized, under-educated and overly optimistic.
The winning trader goes in expecting to lose.
Why is this smart?
Because you WILL lose.
Trading is a profession like any other, and it requires a lot of education and … EXPERIENCE before you become successful. While you are gaining experience you will be losing money.
Seriously, it’s completely ignorant and frankly insulting to professional traders, to think you can read a few books, take a course or two, and then start making money in a week or a month or a year or two.
Would you have that expectation of becoming a doctor, or a lawyer or a professional football player?
But for some reason people think trading is easier than other professions.
I can’t tell you exactly where trading falls with regard to “difficulty” in relation to other professions, but I can tell you this – new traders grossly underestimate the difficulty.
I’ll grant you this. It looks easy from the outside. It is “deceptively difficult.”
It’s a performance-based profession and very, very psychologically demanding. It’s more like being a professional athlete than being a doctor or lawyer.
It’s less analysis and more performance than most think.
Now, back to the beginning of our article …
You ARE part of the mass psychology. The reason your trades seem to go against you in such an uncanny fashion is precisely because you’re thinking and behaving like the masses.
Don’t get down on yourself. What you’re doing is simply “human.”
As much as we pride ourselves on being individuals, the truth is our common traits are much stronger than our individual ones. Humans are by nature social beings. We have a herd instinct.
So when we trade, that instinct comes into play. It’s the most natural thing in the world and everyone does it, because it’s instinct.
But to be successful at trading, you must stand outside the herd. So in a way, it can be said that …
GOOD TRADING IS UNNATURAL!
As I’ve mentored students in my home I’ve been able to witness this first-hand. Student after student honestly believes they are doing something different from other traders. But as I watch them trade and look at their trading logs I see them all making the EXACT SAME MISTAKES! All of them … without exception. It’s almost eerie!
So how do you overcome those natural instincts?
Stay tune for part 2 of this article!