"Things may be different than they seem". Photo by Pixabay from Pexels
Hi there Guys. If this is the first time you read me, you may expect much more from this blog so make sure you hit the follow button and be ready for some truth about what trading really is.
So in this days anybody wants to be a trader or at least, this is the misconception that is around. Trading per se is a long path where you cannot rely only in your technical analysis. There is much more about this, this is why I write this article.
One image worth more than thousand words
The fashion is about getting people to start trading as fast as they can. Have you found yourself searching about trading in google, and after that unique search you did now each and every ads on your PC is about trading? Even on Facebook. Well, the man on the machine is looking for you, so be ready for it. The problem is not fake publicity the real problem is when we as, naive people, we go after it.
"Learn a methodology and in a few weeks you will be earning lots of money"
Maybe those are not the specific words on any ads that offer us the holy grial of trading but it is close enough. Basically when you start deepen into trading, it seems fascinating.
Wow, there is so much to learn about the indicators. RSI: it is a good one.
Man, look, there is an indicator that can almost predict what the market it is going to do...I must learn about it.
Right now there should be around 1000 different indicators under more than 100 kind of softwares that allow you to trade. Any indicator may help you to try to guess or even anticipate to a possible trading opportunity but believe me this is not the key.
A very good trader, called Joaquin Vega has a slogan that says: Do not trade as the majority of people.If you want to see his videos, go for it. You may need to activate English Subtitles or learn some Spanish(Is never to late to learn something new)
He also says that if you measure your trading by percentage you may end up with the following:
- 40% Capital management.
- 40% Psychology.
- 20 % Methodology.
Photo by Rami Hammoud from Pexels.
Ready to go down into the rabbit hole, Alice?
Let us start by saying more about this:
Just around the 5% - 10% of trader's population are the "best of the best" traders in the world.
How many traders are in the hole world?
According to Quora there is around 9.6 millions of traders. Making a simple calculation, it means than only 480,000 traders in the world are consistent while winning.
Why so few people and why there is so much advertising?
Good question, Mr. Spook. If we analyse the facts, most of the which you will get them after start doing trading by yourself(I mean really doing it: research, essay & error, practice and lots of practice):
- The Stock Market needs each and every trader in the whole world in order to sustain the business.
- Only just a bunch of guys are capable of handling hedge funds with millions and, possibly, trillions. Psychology rules.
- If they present the trading business as something real where you need more than just a couple weeks and a trading strategy, the most of the people won't participate. This is not good for their business.
- Imagine around 9,120,000 traders(this is called the public not the professionals) doing 10 transactions per day. Each trading "opportunity" they do, creates a trading fee let us say for about $1(the reality is way far beyond), this will generate around 91,200,000 just in fees. I am not even quoting the money left on the table which are the investments of each and every trader.
- The professionals a.k.a "Strong Hands" need all the public. They need to move big amounts of money and they need to manipulate people.
Hell, man,If this is trading I won't participate...
I know this post doesn't sound very promising but it is real. This reality is something the markets and the strong hands do not want you to see until you are in and maybe with debts you took in order to participate with them.
What is the meaning of being a trader if looks like all is designed to make you loose?
That is the thing. If you really want to do this then you need to start thinking as the professionals. Also you will need to experience the whole process in order to make your mind.
Photo by João Jesus from Pexels.
The process - Normally-
A person decide that wants to be a trader. This person needs knowledge about the market. Usually here is where this person looks for a Trading course or academy. There is many out there. So this guy/girls get into the academy where the instructor will teach only what he does and how he does it. The person after some weeks or months believe is ready to take this trading thing to the next level.
It funds an account and start trading in the "real world". After some lucky operations, the pain starts. Here is where most of the people who start doing trading, just after a course will loose their money and probably kill their accounts.
So this person believe the problem is the system. He/She goes to another academy or try another strategy. This is the infinite cycle. One trader can get lost while learning about new indicators(believing this one is better than the other one, and so on). One person may get really lost, frustrated and crazy believing than all this trading stuff is bullshit. At this point some people quit. Some of them will quit for a long time and the ones whom had the more painful experiences will quit forever.
This cycle goes on and on and, in the mean time, the markets are getting money and the professional traders are still being consistent.
Some people, like in my case, do not give up. After passing by all this process I have decided to start thinking like this "professional guys" but I needed to start all over again with a different point of view.
Just because everyone is doing it doesn't mean is a good thing, or the only way
So let us observe a bit this sentence:
Almost each and every academy teach you about: indicators, patterns, price, volume and software.
Now let us ask the following question:
If the professional traders know all of this won't be easy for them to use all this knowledge in order to manipulate the masses?
The answer is yes. They do it because they need to. I have used to think that this was a bad practice but now I understand that it cannot be done in another way. In order to buy 2,000 future contracts you need to make the public believe that the price is going down. This is the only way you can take all their Stop Orders and lead the price way up where you can sell it for a higher price.
Opposites that need each other
All in life has opposite. We have nights and also we have days. We have beautiful girlfriends/boyfriends and we also have nice friends(Ha...). The point is each and every opposite need each other. We need offer in order to supply demand. In the right moment you understand the whole act, you can start planing in order to act in your own benefit. Take a look of the following picture, this is me while practicing in a demo account:
Typical manipulation in Nasdaq Futures. source
In this picture we may see: Some important leves of support and resistance. Usually this leves are tested in previous days(the zones where the price couldn't break). If you see the image closer, you can see how the "dance of the markets" is being played.
After getting close to a support zone(around 7,926) the price breaks this area making the public believe it will go down very hard. The "coincidence is than this zone it pass a bit further from the previous support area(around 7928). Then what we do not see is that all the traders had their STOPS just above 7,928. When the professionals decide that it is time, they turn the price up and using market orders, they take all the order in their way up, up ,up."
So my fiends be ready to think as they do and also to act as they do if you really want to make money in this business. There is no other way. I will finish this long post for now but please do not worry if you have no idea about some terms I have used here as: resistance, supports, price, STOP orders and Market Orders. I will explain this in the next posts. The whole idea of this new series of post is to share what I have learned and also to open your eyes to the real trading matrix. Bye Bye.