I can give you the best rules in the world and the best methods for determining the position of a commodity, and then you can lose money on account of the human element, which is your greatest weakness. You will fail to follow rules. You will act on hope or fear instead of facts. You will delay. You will become impatient. You will act too quickly or you will delay too long in acting, thus beating yourself on account of your human weakness, then blaming it on the market. Remember that it is your mistakes that cause losses and not the action of the market or the manipulators. Therefore, strive to follow rules, or keep out of speculation, for you are doomed to failure.
If you will only study the weakness of human nature and see what fools these mortals be, you will find it easy to make profits by understanding the weakness of human nature and going against the public and doing opposite of what other people do. In other words, you buy near the bottom on knowledge and sell near the top on knowledge, while other people who just guess do the opposite. Time spent in the study of price, time and past market movements, will give you a rich reward.
W.D Gann in How to Make Profits in Commodities
These lines were written in the 1940's. And only because we now use blue-tooth we're supposed to be more advanced!
The following 63 users say Thank You to George for this post:
OK - real time example of rule following regret. I had a decent morning in the market. It was coming up on 11:00 am Friday. I trade Forex. My rule is no trades after 11a on Friday because market dies...usually....but I'm still watching...because I need to get a life or because of the last trade I have my captain invincible outfit on... I see the setup coming... market flips. I don't take the bait...and 35 ticks. AAAAAH. So maybe I should ditch that rule. NOPE. Just because your rules aren't 100% doesn't mean they aren't valid. How did that rule come about you ask.... Some rules are more expensive than others.
The market stalled after the move....
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The following 7 users say Thank You to websouth for this post:
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The following 17 users say Thank You to Big Mike for this post:
I was trying to explain trading to a buddy of mine last night and it was obvious he was becoming more confused the more I went on. Finally, he said, "if you're supposed to treat trading like a business, what would you tell a bank if you went in for a business loan?".
This question really took be aback as I never really thought about it that way before. But I plodded along anyway.
"Well, you see, the markets are fixed. It's not exactly collusion but it is definitely a game controlled by big money. And the big money can only maximize their profits by tricking retail traders. Let's say a strong uptrend is underway and you're waiting for a pullback so you can go along for the ride."
He stopped me right there and asked me, "Why wait for a pullback? If you have a confirmed trend then simply enter upon confirmation."
Guess what? I couldn't come up with a concrete answer to his question. Although I explained margins, slippage, commission, etc. to him it still didn't do the trick. Then I went into trading strategies and some indicators. In short, he said I was over-thinking the situation. Since no one can predict when a "run" will end and the pullback begins, just hop on the train and get out of the way.
I think he's right.
The following 2 users say Thank You to hondo69 for this post:
I totally agree. I would make a lot more money if I followed my own rules. I have had the same setup for 13 months now you would think that I would trust it more. When looking back at the charts it trades at 68 percent. But when I trade it with real money I only trade at 45 percent. Money management is the only think that saves me. I truly believe that trading is easy and that we over complicate it, and let our "intellect" get in the way.
The following 4 users say Thank You to sjrider for this post:
You don't need to wait for pullbacks, if that's your setup. Setups minimize risk that's all they do. If you don't need to minimize risk then just enter at market, but if you treat it like a business, most good business try to minimize risk.
The following 5 users say Thank You to cbratton for this post:
You know, it's interesting. Of course it's tempting to agree with Gann on the "follow the rules" point, but I wonder how much that really matches with my experience in the markets. I guess my question boils down to: does anyone have a set of rules good enough that simply following them is "the answer"?
Because, if they did, I would just program it and go sunbathe on my private island from then on out. No more human weakness. In reality, though, every time I make an automated system, it underperforms what I can do discretionarily by a wide margin, if it makes money at all. And, if I'm to be honest, when I trade discretionarily, I bend and break my "rules" fairly often. (not the "don't pull stops" kind of rules, of course!)
I suppose you could assume that I've got subconscious rules that are better than my conscious ones. But, since they are subconscious, following them feels like bending my rules to me. So, I don't know if I'm following Gann's advice or not.
The following 8 users say Thank You to Richard for this post:
OPS!, seems like Gann has managed to make you mad!
He's not talking about, or maybe I should say I'm not talking about, because Gann is dead and cannot speak any more. I'm using Gann as a reference point in order to show how the human element and nature looks like today. And that there's no change to be found either, in other words human nature is still the same even we're facing a 70 year old development on the time line.
By the way!, You've made me curious, would you mind explaining what the solution is instead?!
We all struggle to make tomorrow look like yesterday!
Get rid of your past and let the future unfold from the now. Past performance is not indicative of future results.