Site Revision Progress

This week we have completed the move of one set of articles from DaytradingBias.com into a separate website, Essence of Trading. Obviously, the site is for the publishing of the article series bearing the same name. I expected to write more articles for the site whenever I find the right topic.

The original Essence of Trading articles are now redirected to the new site to avoid duplication. So don’t be alerted that you are redirected there. In the meantime, I have the tedious task of reviewing and editing the articles on the new site to make sure they have the correct formatting, etc.

In the future, I will invite other successful professional traders to pen articles for Essence of Trading. Many of my trader friends are not the type who enjoy the spotlight hence don’t hold me responsible when I come up empty handed on this pursuit.

More changes are coming to DaytradingBias.com as we are streamlining the design to prepare for the launch of the new real-time trading signals and trading models.

I will keep you all posted.

Have a nice weekend all!

Long Lives Windows XP or Is That a Major Time Bomb Ticking

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One worrisome thing I noticed during my trip to Asia several months ago was that Windows XP is everywhere. I am not joking here. Even though Windows XP has been discontinued by Microsoft with no updates and totally open to all kinds of exploits, it is still heavily in use. This gets me thinking, maybe those end of day prophecies are not about bombing, wars or whatever humanity issues but just that Windows XP stops working one day in the near future.

Odd Encounters

Official support for Windows XP has ended in year 2014 yet almost all the government services I have to deal with are still using Windows XP. Remember I travelled to quite a number of countries in Asia. This means all these countries, assuming they are using legitimate copies of Windows XP, have not upgraded their computers nor the operating system for at least 10 years already.

Originally I intended to take photos of these computers but I was challenged multiple times with serious threats to my personal safety for trying. Seriously, I did not, like, pull out a big ass camera to take a picture. All I tried to do was to take a quick photo with my cell phone. And nope, it is not allowed everywhere. The hassle I have to went through for even attempting to take a photo or asking about the computers is unbelievable. It is as if I was trying to spy on them or catching them for doing something criminal.

Bureaucrats Do Not Really Care

I do not see this as an issue of the frontline government workers. They have to use whatever they are given. I wonder who gave them the instructions to forbid people from taking pictures of their computers showing the Windows XP desktop or logo. And more importantly, what is the reason for being such paranoia?

My theory is that those who made the decision to use Windows XP computers could have been long retired in all these countries. If not, they probably moved higher up in their ranking or positions already. Hence those who inherited the existing equipment have no idea that computers are not furniture. Maybe those who originally made the purchase decision also have no idea that computers are waste asset that have to be replaced while they are still working.

Since we all know how bureaucracy functions in the real world, it is not hard to figure out the rest. Replace a broken computer is allowed. Repairing a broken computer is part of the maintenance program. But upgrading to new computers with operating system that may not work well with the rest of the deployed frontend computers, is definitely not a good idea for any smart bureaucrats who care about the safety of their jobs.

As long as these computers are still kicking, the bureaucrats in power would leave the headache of computer upgrades to the next bureaucrats.

Windows XP Is Common in Many Critical Government Services

I will not name names here. In the countries I have visited, Windows XP is used in customs, police stations, fire stations, centralized control centres for major bridges and tunnels. We are talking about critical government services here. We are also talking about the most vulnerable version of Windows being used for such purpose.

If these governments want to reduce the upgrade overhead, they have to bite the bullet and switch to something cheaper like Linux. Of course there will be huge up front cost to switch over and likely firing many of the IT staff too because they may not be tech savvy enough to maintain Linux based computers. In other words, either way these government departments are facing large expenses that the politicians will not approve. This is the other reason why many countries are stuck with their trusted Windows XP computers.

Time Bomb is Ticking

I am not saying Windows XP does not work well. In fact, the matured version of Windows XP was much better than the initial releases of Windows 7. Windows XP is also much less demanding in terms of CPU power. In short it is more efficient.

The problem though, is that Windows XP was released so long ago, that the components in those old computers with Windows XP can stop working anytime. When that happens, it is still possible to get new computer hardware to work with Windows XP now. In a few more years, however, it may no longer be the case.

A good example is the newer generation of USB ports. Currently, we are having the 3rd generation of USB being adopted everywhere. Windows XP can barely working with the components supporting this generation of USB. Soon, when the 4th generation becoming the standard, it is likely it may not even work with Windows XP at all.

I can foresee already that massive computer failures on these Windows XP machines happening in the near future. When that happens, I wonder if the government officials and the politicians understand what it takes to resolve the problem.

Defusing the Time Bomb

Hopefully, some government workers and high up bureaucrats, get the chance to read my post here. The important thing now is not to panic since they cannot suddenly upgrade all the computers anyway. By having a disaster management plan in place, it will take care of the crisis faster and minimize the impact of normal government operations. I think that is the number one priority for these government departments.

Many IT departments already adopted the practice of taking complete image of their deployed computers. Such backup image is great for dumping onto another computer should the original machine break down. It minimizes the down time but it only works if the target computer is having almost exactly the same configuration with very similar components. This is where the real bottleneck is as I discussed earlier in the article. Basic image of the computer hard drive is not good enough any more.

To improve the situation, the IT departments can create virtual machines of these frontline Windows XP computers. There are many solutions out there that do not cost much and can handle this task perfectly. What it means is that when new computers are needed, any hardware available can be used and having the cheapest stable operating system installed on such computer will be enough. The actual solution is just deploying the virtual machines onto these new computers.

Of course there are technical details that has to be attended to but it is well worth the effort. If anyone cares about the continuity of their computer systems operate smoothly with minimal down time, using virtual machine technology is probably the best solution right now.

Personal Agenda

I have my personal agenda here when I am writing this article. I actually talked to some high up government officials who understand the problem but they do not know what to do about it. Obviously, their people who manage the computers have not keep up their knowledge with the current technology we have nowadays.

I do not wish that one day I am stuck at a airport just because the computers suddenly not working and they have no way in restoring the service quickly.

I do not want to spend days waiting for something from a government just because their Windows XP computers are out of commission.

Hopefully, more people are aware of this crisis in the making so that it will be defused before major impact is felt when these Windows XP computers failing massively in the future.

NeoTicker Blog Site Recovery Near Completion and My Non-Scientific Survey of Trading Platforms

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If all goes well, we will get the NeoTicker blog site back up either this weekend or early next week. There are several things that has to be done first and it takes time to allow the internet to recognize the site. I will post the link to the site here once I can see it from my laptop.

Update: the site is now online, you can access it here

http://newsletter.neoticker.com

I put the question out to my premium members at DaytradingBias.com, asking them what platform do they use for trading. Interestingly, all these fancy rewards given to all these brand name brokerages do not reflect which platform being the most popular ones. It is not a surprise to me because I know all about the dirty secrets behind these magazines and financial media since the days I was purchasing advertisement for NeoTicker years ago.

The one that majority of my subscribers asking me to support is NinjaTrader. The other one mentioned a lot is TradeStation.

Both platforms have decent support with large communities of traders built around them. It is difficult for me at this point to say which one is better when it comes to deploying the trading tools and models I am porting from NeoTicker. I have already opened multiple trading accounts with various brokerages to test drive my trading models on them. A side-by-side comparison will tell us which one is really better in real trading.

One project done. Many more to go.

Have a nice weekend all!

Photo: A baby crab in Maldives. Magnified approx. 10x

Madness with Trading Platform Differences

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A week into testing various trading platforms on live data feed gave my team a nice little surprise. It turns out, the customization around the major retail trading platforms is a lot more work than we thought. This affects not only the indicators (minor issues) but also backtesting results (major issues).

For major retail trading platforms, I am referring to, well, the ones that majority of retail traders are using. So, that includes Tradestation, MultiChart, NinjaTrader, eSignal and MetaTrader. These platforms are the ones I get to open brokerage accounts to test them directly with live data from the brokerages. It turns out, even the minute bars on forex data are so different that we cannot even believe that we are looking at the same symbols in real-time. For other data like Emini S&P, the differences is minimal in terms of real-time streaming but the way how some of the bars are constructed definitely affect decision making from platform to platform.

I lived through such nightmare decades ago when I was switching my trading platform. I did not expect that the same issue still exist today. Maybe I am asking for too much?!

This is a very interesting experience for me but I cam imagine how frustrated many retail traders can be when they switch from one platform to another as they switch from one brokerage to another.

As we grind along the process, I learned that for even a simple indicator like the one for charting STOPD levels will have to be implemented in ways completely different from one platform to another. In long run, this will be nightmare scenario for maintenance of the more complicated indicators and trading systems across multiple platforms. A simple wish to provide cross platform toolsets is now turning into something a lot more complicated.

A challenge that deserves a place in my weekly rant, indeed.

Reviving NeoTicker Blog Site and Updates on Other Projects

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Within several weeks, I am optimistic that the NeoTicker blog site will be restored. The site was hacked through exploits in the older version of WordPress which led to massive email spamming coming off the site. I made an agreement with NeoTicker’s company to oversee the restoration project. So far things are progressing slowly but it will be done very soon. After all, many of the articles I wrote on trading are posted there. It is a valuable resource for not just NeoTicker users but the whole trading community.

After very long deliberation with my team working on the real time trading signals for Emini and Forex, a surprise decision is made. Against my personal prejudice, I will delivery the trading performance reports in Tradestation format. In other words, at least some of my trading models will be backtested and tracked with Tradestation. People who know me probably know why NeoTicker existed in the first place and it was not based on a good experience with using Tradestation.

This also implies that I will offer my indicators and trading code in Tradestation format, in addition to the other ones already supported.

For the ebook Art of Chart Reading, I am waiting for the edited version on the remaining chapters. From there I will have a lot of reading to do to finalize the project. This is going to make my busy schedule even more busy.

For many of you waiting for so long for my forex research and courses, they are progressing slowly. Unlike the web articles, this time they are done in a very different fashion. As I mentioned before, it is now time for me to produce the much more sophisticated materials.

The amount of time and effort necessary to produce a book length course on trading models is exponentially longer than having each chapter being independent article like the ones I wrote for daytradingbias. On this aspect, I totally underestimated the commitment necessary hence slowing everything down so much. Luckily, I am not those people who give up easily. I can see light at the end of the tunnel at this point.

Enough babbling. Back to work.

Belated Happy Easter!

The 10 and 12 Year Cycles That Shape Our Lives

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Many people interested in astrology would have experienced “a reading” done for them by astrologers. The routines are similar for both Western and Eastern astrology by telling the person something about their personalities, what is happening now and what may happen in the future. After all, majority of those who want a reading are not doing it out of curiosity. Many of these individuals are standing at a crossroad for which some major decisions have to be made. Yet, these people are so confused and worried that they have to resort to ask for help from astrologers …

Note: Following writing assumes that you believe somehow astrology works.

Reliability of Asking for Divine Clues Through a Third Party

One of the weaknesses of having astrologers reading your charts is that they may not be able to understand your situation enough to project the possible outcomes based on your birth date and known conditions.  Here is a good example. If the astrologer is not knowledgeable enough to know that there exists technologies in the near future that your medical issues can be cured, based on limited understanding, the astrologer has to conclude that you may not be able to live through the ordeal.

By similar reasoning, how worldly the astrologer is will determine how good the interpretations of your charts will be. Your future are many possible outcomes based on your actions and decisions today. The more logical and knowledgeable the astrologer is, the more likely you will get sage advices. But that holds true too if you talk to someone who is not an astrologer. As long as this person is logical, knowledgeable about your situation and has deep understanding of human psyche, you are likely to get very good advice as well.

Suggestions from Expert Astrologers vs. Knowledgeable People We Respect

Most of the time, the problem of finding a solution is not that we do not have the answers. The problem is that we choose not to take the path that we know will solve the problem. Seeking for better understanding of a situation is a good move for solving all kinds of issues. However, seeking for approval of our choice from others is a form of evading responsibilities.

That’s why it is so appealing to look for help from astrologers. People will choose to listen to the astrologers because they represent clues from divine sources which can help those people seeking for help to overcome their irrational biases. It is kind of blame the others attitude should things goes wrong.

When we get advices and suggestions from people we respect on major issues, many people will eventually choose what they feel comfortable with, ignoring the warnings and good advices anyway with the additional bonus of creating false memory in their own minds so that they can blame on these people who offered their opinions in the future. I have seen so many people doing this type of self sabotage to themselves. They cannot help it because they lack awareness of their own weaknesses in the first place.

When You Need to Make a Big Decision Do This First

If you are at least 30 years old, here is a simple thing that you can do to get consistent answers to your tough questions about your life altering issues.

Just look back 10 years ago to see if you are affected by a similar situation. Sometimes the issue is not affecting the same area in your life but the overall scenario will pin you to the same position. For some people, it can be something that happened 20 years ago or even 30 years ago. The important thing is that you should be able to tell at once if you can remember what happened in the past because the timing should be very precise.

For example, 10 years ago you may have a troubling relationship with your partner at the time that you have to choose between breaking up or giving up your dream job. The current situation could be that you in a bad relationship with your coworkers who try to take advantage of you while the boss turning a blind eye.

Think of what you did back then. Reflect on the situation to see if you have chosen the right decision. Most important of all, did you make the decision back then that you are still regretting about. This will give you a good idea what not to do this time.

In short, you do not need an astrologer to tell you what to do. You can figure it out by yourself as long as you can be truthful to yourself.

10 Year vs. 12 Year Cycle

Majority of people are more sensitive to the 10 year cycle while others see repeating patterns in their lives on a 12 year cycle. Usually just one of these two cycles dominate a person’s life. It is easy to figure out which one affects you more. If you have married or that you have a child, just look back and forth 10 years and 12 years from those dates to see if other major events happening to your life. This will give you a baseline on how things happening to you in a cyclical basis.

In case you wonder, these cycles do not start from the day you are born. Everyone has a slightly different starting point up to 8 years old. The later the starting point in life, the more likely the person has a wandering mind before then. This starting point affects how people mature into adulthood as it usually takes 2 cycles before a person finally start to think about the future.

After 3 full 10 years cycles, if a person has not progressed enough in awareness, Eastern astrology points out the person will likely be locked-in by fate. What it means is that astrology will work so well on these people that they are expected to repeat all the mistakes they have made before. Notice that it has nothing to do with good fortune or bad fortune. It is just that what may happen in the future to these people are more predictable.

The Power of Virtues in Breaking the Cycles

When we choose to live by a set of virtues at all cost, we program our minds in a way different from the one driven by our character traits and emotional burdens that we know are a mix of our genetics and our upbringing during our childhood. Choosing to live by our virtues helps us to make hard choices and better decisions when fear and greed are affecting us the most. In short, we simplify our lives while improving them significantly in all areas by just following a set of ground rules we choose to believe in.

I am not saying we will make the best decisions in all situations we encounter in life if you follow your set of virtues. What I am saying is that having a set of virtues in place is like having a consistent strategy to manage our lives so that we can have consistent outcomes that we can count on so that we do not need to worry about every decision we make are good or bad. We know on average we will come out doing fine. That’s all that matters.

It is easy to see how such strategy can impact the outcomes from all the cycles a person has to go through.  Normally, a person reacts to the events in life with emotional swings. Many important decisions are made on-the-fly, at least partially driven by the emotions experienced. Such decisions are often made without considering all the facts hence are more likely to be bad ones with negative consequences. In contrast, someone lives by a set of virtues can limit the options to choose from and eliminate the ones that does not follow the principles. With fewer important decisions made badly, the so-called fate or cycles can no longer limit a person’s achievement and success.

Think about it – just the anxiety and worries you saved yourself from by having a good strategy in place to manage your life can do magic already. Being able to sleep without all these wandering thoughts put you way ahead of many others in terms of quality of life. With reduced stress, better clarity of mind becomes possible and in turn better decisions are made more often. Cycles, whether they exist or not, no longer matters.

Site Revision Progress and Good News About My Book

Very busy week trying to get many things done for daytradingbias.com

I have been testing various ways to report trading results that is maintenance free (i.e. no manual work) and so far much of the available options are not that satisfactory. Since I am going to introduce several sets of trading signals for various markets, this function is a must-have feature.

I really do not know how to do this right.

I guess keep grinding until I get through this is the only option.

On the other hand, my book Art of Chart Reading is finally go back on track for publishing. A number of revisions to daytradingbias.com relating to Art of Chart Reading will be done soon to match the release of my book. It is a project that is long overdue. I am very happy to see this completed finally.

I am working on several other things in parallel that are closely related to the website. One of them is whether I should make the high-end trading models and indicators available directly on several platforms like Tradestation, MultiCharts and NinjaTrader. I still have not decided on this yet. If any of you have suggestions about this please let me know.

My Journey to Fully Automate My Trading: Understanding Discretionary Trading

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There are two main approaches to trading for decades. One is discretionary trading and the other is mechanical trading since the rise of the personal computer era. Retail traders are often molded into one of the two camps and led to believe that one is superior to the other. This naive belief causes so much misery among the retail trading communities that it deserves a much better narrative to explain the subject.

Trading is a Trap to Lose Money for Majority of People

I have explained in so many writings including several series of articles for beginners to understand what it takes to learn to trade successfully from scratch. In short, majority of people attempting to learn to trade discretionarily will fail, either right from the beginning or eventually, because they have not corrected their internal belief system to handle trading from the proper perspective. There are many courses out there teaching people how to correct their belief system but it only works on those who are willing and determined to change themselves for greater success.

This leads to the appeal of mechanical trading for anyone who understand the obstacles with discretionary trading. After all, a mechanical system with the right edges should generate profits automatically, isn’t it?

It turns out trading with mechanical models takes the same type of belief system in the first place to achieve success consistently. It is just a different approach to the same pursuit for those who are more scientifically minded with personalities more open minded to accepting automation.

Basic Success in Discretionary Trading

In other words, knowledge is secondary in terms of achieving basic success in trading. What I mean is that if one is seeking for consistency in making money from trading for the long term, the best approach is to fix themselves first. Getting oneself ready for trading, or simply any other business or venture, is the same. Any basic concept in approaching the market with just a little edge will give the trader consistent profit over time, given the people has the right attitude and beliefs in life. Whether the trader is willing to accept what the market is offering based on specific approach to that market is a completely different question.

One thing we have to understand though, is that discretionary traders do not acquire exactly the same set of knowledge for a trading strategy as mechanical traders.

For example, a beginner learning to trade discretionarily is taught to buy pullback in an up trend. If the beginner is willing to focus on this one and only one idea, with full attention to figure out all the details of this single trading setup, mastery of this single technique will happen and consistent profit will follow. But some people just do not hold the belief that pullback setup works and until they change their attitude and embraces the concept 100%, they will never be able to trade the strategy with 100% consistency. It has nothing to do with vagueness.

Look at the skill of riding a bike to see why vagueness does not matter.

When you ride a bike, do you know at any moment exactly how much force you need to apply to each individual leg to get the bike moving?

Do you need to know the exact theory and details behind the fact that you can balance on the bike while it is moving?

You just know how to ride a bike because your brain is trained to handle the details for you by taking all the sensory inputs into account but only if you let go of the belief that it is impossible to ride a bike and believe 100% that you can do it too. Once you learned to ride a bike, even after years of not doing it, you can pick it up quickly again because your brain is wired to believe that you can do it already.

In short, you are programmed to react properly. This also explains why some people are better at discretionary trading. They are more adapted to learning from all their sensory inputs to form the basis of their acquired knowledge.

Basic Success in Mechanical Trading is Different

In a similar situation, when a beginner trader is taught to look for mechanical setup to trade a pullback, they have to look for things that are quantifiable that can be converted into rules that a computer can understand. Since a beginner trader has limited knowledge about the market, their research on how to quantify the pullback strategy will be limited by whatever knowledge they start with.

This approach works well with those who believe 100% that the rules they have discovered will deliver consistent profit over time. In other words, it is acceptance of the discovery and its past performance, disregarding how they come from or why they work, that is necessary to make the mechanical trader consistently profitable. It is hard to do, especial for those people who are actually more suitable with mechanical trading, because people who are more evidence driven and scientific minded are those who likely prefer high probability winning although what really matters is that the strategy discovered is consistently profitable with controlled risk.

Due to lack of complete sensory input like learning to trade discretionarily, mechanical trading strategies discovered by many traders are likely to have lower winning probability since they do not have access to better depth of trading knowledge. Being able to accept this lower probability of winning, is key to basic success in mechanical trading. In this aspect, the hurdle to trading success is very different for discretionary trader from mechanical trader.

Good Discretionary Trading Takes Only a Combination of Consistent Trading Strategies

To become a good discretionary trader, one has to learn to add trading strategies to their trading arsenal one at a time. Once the trader has master several trading strategies to complement each other in different market environment, the trader will perform many times better than a trader who mastered just one trading strategy. Many discretionary traders believe that it is their trading skills improved that leads to the exponential growth in performance . What really happened is that they are benefiting from the Law of Large Numbers.

By looking at a good discretionary trader from mechanical trading point of view, the performance of a good discretionary trader is a combination of several high probability winning strategies. Due to the increased frequency in trading and that the strategies are likely complementary to each other as the trader is adding strategies to handle different market environments, less drawdown is expected and so is consistency in profitability on, say, monthly basis.

In other words, it is not an overall improvement in trading skill per se. It is proper parallel combination of applying these individually profitable strategies that leads to better performance. Traders failing to realize this will suffer eventually as their egos take over their minds and ruin their futures as they hit the eventual obstacle of performance block.

The combination of multiple strategies does not require the trader to understand them from a higher level of clarity. Just like being able to ride a bike and eventually learned how to ride it to do difficult tricks, one does not need to understand exactly how the tricks work in terms of physics. Eventually, there will be tricks that no matter how hard one tries to do them, it seems like they are impossible to do. That’s the performance ceiling. One will not be able to overcome until after playing catch up to learn the science behind riding a bike so that one knows exactly what is required to accomplish the more complex bike tricks.

From this perspective, mechanical trading of multiple uncorrelated trading strategies can offer the trader much better consistency in performance because the mechanical trader does not have the burden of not knowing how to handle the potential conflicts among multiple strategies. All the mechanical trader has to do is to let all the trading models do their own thing. As long as the trading strategies are followed, the aggregated result in performance should be close to the expectations.

Thus good traders will have to eventually accept the fact that they can only do as much in terms of extracting profits from the market if their trading strategies are just a combination of techniques that they do not have deep understanding of. Relearn everything about the markets they trade is a risky business decision that everyone has to evaluate carefully.

Great Discretionary Trading Requires a Coherent Framework

Great discretionary traders are different from the good ones because they have a completely coherent framework in mind. All their trading strategies are derived from the framework hence there is no internal conflict whatsoever when they engage the market. In the minds of these great traders, everything is happening as they are supposed to be. Observing these traders trading, it feels like these traders know what will happen next in the market before things actually happen.

I am not saying these traders really can tell what will happen next in the markets. What really happens is that they know what is more likely to happen next with their deep understanding of the market anchored by their framework on how a market is supposed to function. There are quite a number of market theories that can help traders to think logically and interpret the information in a structured way. Notice that not all of these theories are functional and it is up to the trader to figure out which one actually works. Assuming a trader picking the right theoretical framework to learn from, it still takes the trader to commit fully to the framework and rewire the brain to think and analyze every aspect of the markets using such framework in order to benefit from this approach.

Great discretionary traders are often not the best performer when they just start out trading with their approach. That’s reasonable as a framework driven approach is never optimized to what is happening currently in the market. But eventually, as these traders are gaining experience in trading, they are the ones who will eventually perform better than the others because they do not suffer from being overloaded by trading strategies that have conflicting principles behind.

Great Discretionary Traders Are More Than Super Mechanical Trading Models

If a good discretionary trader is simply a combination of several well defined trading strategies, a great discretionary trader is a super trading model that is built on top of a complete price discovery framework. Using the phrase super trading model is really an understatement considering a discretionary trader has to develop the discipline to manage every trade with straight risk management, let alone handling the psychological challenges like emotional interference from losing and winning streaks. Above all, great discretionary traders also act as control of their trading models. When these great discretionary traders notice a change of market behaviour, they can formulate theories on what caused the changes based on their frameworks to adjust their trading strategies to work better in the changing environment.

Hence it is not that difficult to emulate a good trader using mechanical models provided that we figure out all the facts that are considered by the trader in making the trading decisions. However, to emulate a great trader, one has to resolve the issue of modelling at least part of the price discovery framework employed by the trader. This can be very difficult as the logic used by the trader can be more complex than some very complicated strategy games like go that are well known difficult computation problems.

As a summary, I do not see discretionary trading being all that different from mechanical trading. Overall, there are many similarities among successful traders in both camps as they have to overcome their egos to follow straight trading rules so that consistencies in performance can be achieved. On the other hand, the distinct requirements for each camp take a very different set of personalities to deal with the issues unique to those trading approaches in order to succeed. To the best of my knowledge, mechanical trading models at the present state are still not as good as the great discretionary traders of our time. By giving the mechanical traders ten more years, they may eventually develop trading models that can surpass the performance of the best discretionary traders in the world.

It’s Never Too Late to Learn to Trade

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One of the themes I came across meeting people all around the world is that they think that it can be too late for them to learn to trade. Coming from that point of view, they ask for shortcuts to get trading success quickly. Thus their enormous interest in trading courses promising instant success and guarantee income from secret trading systems showing consistent performance, say certain amount of money every month. Is it really true that it can be too late to learn to trade properly?

It is Never Too Late to Learn to Trade

I have met people from all walks of life from all age groups who managed to get trading success. I know several traders who started to trade by the age of 60 years old and they managed to do pretty well in trading after several years of committed learning. In fact, it is usually a bad idea for young adults to go straight for a career in trading after graduating from school because they lack the normal work experience needed to develop good working habits like discipline and perseverance.

Given the modern age life span, it is not a surprise that we will live to 80 or 90 years old. Hence learning to trade properly and gaining success in trading by committing several years to acquire the knowledge and develop the necessary skills is a great investment. Yes, by 70 years old, it may not worth our time to take on this challenge. But if you are younger than that, the benefit of having the proper trading skill set in place will pay off handsomely for many years.

There is really no excuse for people at their 30s, 40s and 50s to avoid learning to trade. Yet, people keep saying it’s too late for them and they need a quick fix. I think the issue here is a combination of cultural misconception and psychological weaknesses.

Modern Day Career Path Has a Completely Different Time Schedule

Our world view of career path is shaped by the beliefs coming from our parents and grandparents. Those people at the age of 50s and 60s were taught to believe that they have to be established by the time they are at their 30s and by 40s they should be on track to a great career path or they will be stuck in life. And then retirement is near as their age approaches 60s. This mindset is completely messed up.

First, by taking good care of yourself, given the modern understanding of the human body, there is really no reason why we cannot live healthily by 80 years old with our body staying fit like we are 40s. The whole concept of retiring by the time we are at 60s was just part of the historical past. Planning your life around that concept nowadays will seriously side track your ability to live a meaningful life as all your attention is wasted on a finishing line that was drawn arbitrarily.

Second, the society we live in now do not bound people to one single career anymore. In different stage in life, many people switch career or even industry at their 30s and 40s with great success. Trading does not have to be a replacement path of the main career you are pursuing either. It can be complimentary as managing one’s wealth is no longer a task that we can put our trust in the financial industry.

Conquer Our Fear of Failure

When we have a reasonably established career path, it is difficult to take on trading knowing that it is a very difficult to master with very low chance of success. After all, just casual research on the internet will tell you that 90% of retail traders will fail. This psychological problem of not willing to deal with failures affects majority of people who are looking to improve their lives in all areas from health to financial success, not just with trading.

The fact is, many people were taught to think of failing to do something is the equivalent of themselves being failures. This thinking is plain wrong. Yet, we are often misled to think this way when we were young as we do not have proper guidance to separate our ego and our abilities. When we fail at doing or learning something, it is just that, nothing more.

For example, I may not be talented at drawing and that even though I tried very hard to learn to draw better, I know I will not be a great artist. The learning process to draw better is full of obstacles with failures all the way. This does not define me being a failure. It is just one area that I am not good at. Without trying, however, I will never be knowledgeable about drawing nor able to appreciate paintings at a higher level. I learn a lot about myself during the process of learning to draw. My drawings produced along the way are not good quality by any standard. But that does not define me being a bad person, or a failure, a very ambiguous term people often use when they cannot find something in their lives that they can be proud of.

Success in any field is the result of accumulating many failures. The most successful people in any field are likely the ones who encountered more failures than their peers. Only by being not fearful of failure and mentally prepared to handle failure as part of the process, will you be able to pick yourself up quickly after every fall. This better mentality in dealing with failures also help us master any craft faster with less emotional torment.

Accepting Our Ignorance

One interesting behaviour I often observed is the underestimation of the difficulties in learning something new. In trading, I have seen many people with success in their own fields often look at trading as something simple. Their perception mislead them into learning this supposedly completely new skill with the wrong approach. In short, they try to adapt the information on trading they are given, no matter how detail or complicated the materials are, into concepts they already have in mind, based on their past experiences in other fields.

This approach to learning only works if you are learning something that has a lot of similarities to something you have deep knowledge of. For example, if you already know a European language like Spanish, then learning German is not as hard. For those people whose background is in Asian language only, it will be much more difficult to learn German quickly even though both are languages for general communication.

But how do we know if we already have deep knowledge in something similar to what we are going to learn?

We don’t.

People in general assume they know because their brains tricked them into thinking that they have some ideas what they are learning. For many simple skills, you can be slightly better than average and you would already be able to utilize that proficiently to solve 90% of the problems requiring the particular skill set. Majority of the skills we acquire in life belongs to this category.

However, trading is one of those fields that in order to be successful you have to be part of the top 5%. This means taking it seriously and accepting our ignorance about trading is very important. This correct mindset will steer us in the right direction, making us willing to learn more carefully like we once were when learning to write while we are young. Being able to take extra care in learning everything in details helps us to build the proper foundation. In turn, it ensures us a better chance of success in trading.

Financial Freedom is a Reasonable Goal

As I explained in my more technical writing about trading, it is not striking it big quickly that matters in trading. It is all about consistencies and having a proper game plan. Once you become more consistent, your performance is just a function of the compound growth rate as you get to increase your trading size over time.

One cannot rush the learning process in trading. The mental development of a person in trading is as important as acquiring more knowledge about trading. There is no shortcut. Just better ways to focus your learning while not wasting time on misleading information.

From my experience working with many traders, once they “clicked”, it takes only 2 to 3 years to get them to produce decent profits putting them at par to top 10% income in their countries, provided that they are trading fulltime. For those who choose to keep trading as their side business of managing their savings, it takes about 3 to 5 years for them to produce enough profits to exceed their main income. Of course, everyone will follow their own pace so my observation can only act as a reference. So we are looking at doubling one’s income being a reasonable short term goal and gaining financial freedom as an achievable long term goal.

In summary, acquiring or mastering trading skill is not as remote as many people think. It often takes too long because people tend to approach it wrong as I pointed out the psychological challenges earlier in this article. If you look at trading serious enough and are willing to commit yourself to the learning process, I am sure it will be one of the best things you have ever invested your time and energy on.