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The author of NoBrainerTrades is an independent asset manager specializing in FX instruments. A former hedge fund analyst, he also has experience working for several large investment banks, in both asset management and foreign exchange. NoBrainerTrades.com is a community of traders focused on... More
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No Brainer Trades
  • Death From Opinions 0 comments
    Dec 8, 2010 3:59 PM | about stocks: CUD, ERE, ERO, FXA, FXB, FXC, FXE, FXF, FXY, GBB, JYN, SPY, SZE, UDN, UUP
     NBT has been doing a lot of work lately, so much that I almost broke a sweat the other day. I’ve been writing, writing, and writing some more in an attempt to push out the last little bits and pieces of what might be considered a technical manifesto by yours truly. But a phone conversation today with a good friend of the site had me thinking drastically about what I was doing. Combine this with a documentary recently watched and I scribble the following words:

     

    • We have a very wide range of books written about thousands of different ways to trade.
    • We have colleagues that teach us how to trade.
    • We have articles on “news” sites explaining why something is happening, and what is likely to happen next.

     

    What do all of the above have in common? They are injected with an opinion.

    News is scarce these days; really, it’s hard to come by just plain, vanilla news. Almost everything we listen to carries some form of an opinion based on the experiences of the author and it in no way excludes our work on this site. Everyone has an opinion to the point where our opinions in and of themselves become the news (thank you Fran Lebowitz).

    So let’s take this all into context and shape/mold/whatever you will into something we can actually use.

    Here are a couple of questions:

    As traders, should we even care about opinion?

    Collective thought drives this or any other market, so in this sense, yes. But understanding this collective thought should not be left to the opinion of anyone other than yourself.

    What is truly the best way to learn how to trade?

    Start with a shell, you do the rest (which is an opinion)

    Jersey Shore: Foreign Exchange Edition

    Listening to a speech the other day given by an unnamed man at a trading seminar I realized how rough this industry can be to learn from. Financial theory floods our college classrooms but find me the university that will teach you anything about a chart and I’m there with donations.

    He talked like a pompous bully (and I’m sure we have all seen his type before). Highly opinionated, “this is stupid, that is stupid" type of fellow, and then goes on to mention his strategies, how they kick butt and somehow managed to get a round of applause upon his departure (I assume based purely on emotion).

    Can anyone internalize this? No, of course they can’t. They just sat there for a few hours listening to a guy that belongs in a schoolyard taking lunch money from geeks rather than a classroom about trading. But taking his ego of awesomeness aside, and merely looking at his trading strategies, could someone potentially take those and use those and somehow generate a profit? I think so, but the person requires a great deal of self-guidance in order to make that happen.

    There is a large amount of information on this blog now. It has been running for a few years and I can easily say that some of the strategies I use the most aren’t even written on here.Why? Because I subconsciously know that if I just post them as is, they will be interpreted in their own manner (and not necessarily a “right” way (in my opinion)). I know that my explanations will lack the depth required for some people, or I might just outright be missing information that is vital to someone trying to learn. Questions are required from readers that are best answered through examples and verbal communication, not simply text on a screen.

    “Trader X”

    Let’s go back to my conversation with “Trader X” today. He is an avid reader and has been through all of the typical training courses, yet still seems to be struggling. Our conversation was initiated by an email he sent me which went into great depth about his situation, and I think we have all been here before: we have read about all the different strategies, techniques, fundamental and technical knowledge, etc., yet can’t seem to “put it all together”. No matter how hard we try it never seems to “click” when you start to trade. He explained to me that he was doing some of the following things:

    Seeing profits come and then giving them back to the market because he is worried about the longer term trade, executing too early, missing levels, etc etc….

    My opinions expressed to him were done so in the following manner (and rather quickly):

    • You are thinking about it too much.
    • You are spending too much time in front of the monitors, festering over money instead of what’s happening out there. You need to be aggressive and draw horizontal / diagional / Fibonacci support or resistance levels on your own while reading or listening to unbiased news (aka raw facts), monitor other markets, watch what happens, and learn.
    • Don’t read any more “this is right, this is wrong” manifestos and just doing what feels comfortable.
    • The opinions of others as to why something is happening and in what form are nothing more than opinions and rarely help you personally understand the real reason for something.
    • You need to forget the books you have read and just do what feels proper to you as an individual.
    • Don’t trade unless you have an “aha” moment. All the other moments are likely to lead to losses.

     

    We all make our own opinions, perceptions and judgments based on our own individual experiences. We then take those opinions and translate them into action. When we listen to others we are doing nothing more than attempting to take their actions and copy them.

    A Xerox copy is never like the original. Trading decisions follow the same rule.

    The Shell

    The Shell is nothing more than the basics. They are facts. They are definitions. My recommendation to a trader just starting off is to learn the definitions of the following terms:

     

    • For technical: support, resistance, fibonacci extensions
    • All major economic indicators in the countries related to the currencies you are trading
    • All major markets in the countries related to the currencies you are trading (Equity / Bond / Credit, etc.,)

     

    …everything else is just strategy / opinion / theory, and not your own. Get a news feed, a data feed, sit, and work. Techniques are to be taken very lightly, but your observation of the relationship between all three of the above is more important than anything else you can possibly do. To reiterate, internalization is key. In order to accomplish that, we have to look at raw facts / charts and data. We can then understand what is happening and only then, create forecasts and execute profitable trading decisions. And at some point, information gained through others can open our minds to new topics that you might have not discovered on your own (it's going to come no matter what...the need for discovery is oh so human).

    You will rarely find skilled traders listening to the opinions of others too seriously. They might generate ideas and get their motors running, though rarely, if ever follow the exact motions of the person that gave it to them. The shell is created with raw information and later transformed by the "hands of the creator".

    We all have a predefined area of comfort. When moving outside the boundaries of this area do we start to travel down the wrong path. Do what feel right, gives you zero apprehension and simply forget about the rest (this is my opinion).



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Stocks: CUD, ERE, ERO, FXA, FXB, FXC, FXE, FXF, FXY, GBB, JYN, SPY, SZE, UDN, UUP
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