STARTING WITH FAILURE

The journey is about coming to terms with the truth. The vast majority of traders ultimately blow out. You have most likely blown out once, twice, or more. The reality is that trading is getting ever more difficult as markets get more so-called efficient.

So with the odds against you, why do you keep coming back?

The fact that you are still coming back is the key testament to your willingness to be in the 1% of traders who are consistently profitable. The mere fact that you have purchased this book is the litmus test. Congrats, you passed.

The journey of achieving "full circle" requires failure. It is only through these failures that we can learn. Learning in its purest form is error driven. The greater the magnitude of failure, the more quickly we learn.

Failure gives you a different perspective, if you pay attention. A full circle is a revolution; a completion without gaps, starting from one point and ending back at that point. The start and the end is the same; however, the significance lies in the journey undertaken to arrive at the destination.

The human component is imperfect. Humans can not compete against the efficiency of a machine. However, humans can adapt and out think, as long as they protect their flaws from being exposed. The purpose of the markets is to exploit inefficiencies and flaws. As a trader, you have to prevent your own inefficiencies from being exposed. This is the constant cat and mouse game that defines the market action. As much as this may sound psychological, the remedies come in physical form.

Once a trader exhausts his efforts to find the "holy grail," and often blows out his account in the process. The trader comes to the understanding that the reason for his failure was the execution of the game plan, not the game plan itself. Once a trader understands and embraces this thinking, he is ready to move forward.

So much as has been focused on various methods, patterns, and setups to the point of total exhaustion. A void has materialized in the market education space. The underlying theme has always been to find transparency before it becomes too transparent. The market is not only a zero sum ponzi game, but indiscriminative when it punishes-generous at times, and merciless at its worst. Everyone understands the markets are dynamic, yet most management systems are static, thereby causing the distortion in the results.

Why is it when a trader follows methods to a tee, he tends to make nice profits during one week and then gets splattered the following week? When this happens, the trader will conclude that the methods need further tweaking and will search out other models and setups. He may be profitable for another week or two, and then get slammed the following week. Once again, the trader comes to the conclusion that the methods are at fault and he again tries to tweak. He will also spend time backtesting the setups and methods. The trader may continue this process relentlessly for months on end, only to end up with further losses. Every time the trader goes through a winning phase, he is relieved into thinking he has finally found the right combination, only to have the rug pulled when he goes into a losing period again. This is an endless cycle that eventually concludes with the trader voluntarily quitting, or blowing out his account.

The one factor that all too many traders tend to leave out when developing methods and backtesting is the very fact that markets are dynamic, not static. Most people tend to naively believe that markets are consistent; that they will repeat themselves in a predictable manner, and will follow time-tested static patterns. Or, they will apply dynamic methods while unconsciously assuming a static market in the background.

When a consistent method or system is discovered and applied success: fully in real time, it is rarely the system that needs adjustment. The real adjustment lies in what environment that particular system can most effectively be implemented. In other words, the markets themselves play a larger role in the success of any method than the method itself The new, "efficient," computer program-dominated markets prey upon the less efficient participants. This cannibalism is the same paradigm on a new scale. If you have flaws, the market will exploit them. In fact, the market will give you the rope to hang yourself Therefore, traders need to start by galvanizing themselves before taking part in the game of trading.