Lessons from the Pros


A Word From The Wise

This week I thought that I would take it easy. Yes, I am still writing the article, as you can see in front of you, but I had the idea that maybe you would like to hear a lesson from somebody else’s perspective for a change? Instead of learning something from me, I thought it would be beneficial for us all to draft in a little from arguably the greatest mind which ever existed and see what we can learn about our trading from him. This week I am calling upon the wisdom of non other than the great Albert Einstein. If by some reason or another you have never heard of him, Einstein was universally regarded as the father of modern physics and is best known for developing the general theory of relativity which he then went on to use in models of the structure of the universe as a whole. While his academic prowess is what holds him in memory on the most part, he was also known for his love of music and life as well, with him taking a philosophical approach to our existence in his beliefs and attitude.

I have often described the journey of trading as being much like the journey of life, in that the more experience we gain, the more we learn about ourselves and how we behave in certain situations. I think that we can all be guilty of falling into the numerous traps set for us in the speculative financial markets, sometimes believing that there are things we are missing out on which are halting our progress and making something which is very simple in nature, to be as complicated as we can! Believe it or not, Einstein although a genius mind, often stated that the most complex questions we face often have the most simple of answers. I thought it would be useful for us to apply some of the teachings of Einstein to our trading activities and see what we can learn from a different perspective. Here are a selection of my most favorite quotes from the great man himself:

“Memory is deceptive because it is colored by today’s events.”

 How difficult can it be for a trader to let go of what they think about the market and plan around what they actually see? Every single trade we take is either going to win, lose or breakeven and let’s face it, the outcome we want each and every time is for it to win. After all, that is why we are trading in the first place is it not? However, our memories of the trades which have won or lost in the past can often lead us to passing on a new opportunity when it comes along, even if it is a solid setup with low risk and a high potential reward. It can be near impossible to take a trade after a series of losses and sometimes it can be just as difficult to place one after a few wins too, because we get used to the “taste” of being on the right side of the market. No matter what happened before, we must learn to take each opportunity as we find it, no matter what we think or feel. Whether we win or we lose the day before, we must learn to let that experience go as soon as we look to the charts, thus preventing the right decision being made.

“We cannot solve our problems with the same thinking we used when we created them.” 

This is probably one of my favorite quotes of all and is so very applicable to trading that it is almost scary. How many times have you made the same trading mistakes over and over again, enduring constant frustration and misery each and every time but you have never done anything about it? Look back on those times and think about what you were learning in the process: a simple lesson that what you are doing is not achieving the results you were hoping for is the lesson. It is time to change your tactics I think, yet it can be so hard, almost impossible to let go and move on but we have to. It was Albert himself who also said that doing the same thing over and over again and expecting a different outcome, is the first step towards insanity. If you are getting good results from doing something a certain way then carry on doing it that way. On the other hand if you are not, then why continue with the same course of action? Einstein was suggesting that we need to shift our mindset to overcome our problems with a different approach to what we were using beforehand and I couldn’t agree more.

“Human beings must have action; and they will make it if they cannot find it.”

 “Patience is a virtue.” If you have not heard that one before then it is most definitely time to memorize it. I think that patience is often one of the hardest things to develop in our trading skill set because as humans with emotions, we tend to want to get results and get them as soon as we can. The problem with adopting this attitude in trading though is that the market does not always present us with good opportunities to take. We can easily fall into a state of boredom (especially when day trading) and take reckless entries into the market, when there actually is nothing on offer at all, just because of our lack or patience. Let’s face it, we judge ourselves by our performance and our results and when there is little happening, we tend to get bored and make something happen. Einstein clearly recognized this trait in human behavior and if it is not controlled, these impulsions can often get us into trouble. A disciplined trader waits for the market to present an opportunity and follows through with a solid core strategy and rule-based plan. If there is nothing to trade, then the trader moves on. Don’t go jumping into the market because you feel the need to trade. The market will always be there after all so save your money for another day.

“Any intelligent fool can make things bigger and more complex… It takes a touch of genius — and a lot of courage to move in the opposite direction.”

 Of all of the quotes I have shared with you in this article, this is perhaps the most impactful of the lot and beautifully sums up the challenges of market speculation which are commonly faced. There is always a temptation to make things more complicated, to go into more detail than is really necessary to make something which should be clean cut, into something messy instead. Trading by nature is simple, it is just not easy and not because of any major “secrets” which others are hiding but more due to the fact that by nature, humans like to complicate matters whenever they are given the chance. Sure Einstein was perhaps the most academic mind the modern world has ever seen, making discoveries about subjects which the average mind couldn’t even comprehend but to me, his true genius was that he knew his own mind, had the courage to think forward and always keep true to himself at all times….what better teacher is there than that?

 Take care and be well,

 Sam Evans


DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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