I am a pattern reader by nature. I see patterns in people, charts, nature, etc. I guess it stems from my love of observing. I was able to excel at football because I loved to study film. Till this day I can still watch a game and narrow it down to a few plays. What most people do not realize is that as you go up in level, the game gets more predictable. Now, even though as a player I knew what was coming I couldn’t always do something about it. Knowing what is coming didn’t mean anything unless I could execute it. I couldn’t execute as well as others, hence why you are reading this now instead of watching me play.
Earlier in my trading career, I was going to be a billionaire and revolutionize trading by transferring that football thought process to trading . This was when I thought trading was a get rich quick scheme. I had designed a way that allowed the user to see these patterns without actually observing them. I thought that I could take a pattern and match it with the pattern from a previous time to see how that day/trade finished.
I made them sign a NDA and I did the whole mail yourself a letter and never open it. The idea was met with laughter. As the saying goes, history doesn’t repeat itself it rhymes. Here is why I was laughed at:
- There is no context. If your time frame is 30 years you should consider a 30 year chart. The further you get from the data the less accurate the data is. Comparing a pattern today to a pattern from 20 years ago is less accurate. Finding a day like today in the recent past is less likely.
- Complicated, there is a way to some extent, to gather the necessary inputs to provide some context but would have been cost prohibited.
- Finally, trading does not work that way. Charts and tools are meant to provide focus and breadcrumbs not to predict. They can and are often self fulfilling prophecies. You have to know the past but be focused on the future.
There is no doubt the system that I designed would be helpful but there was a more efficient ways to get there. I was able to see the pattern in football because there are less moving parts. Removing the moving parts is harder in the market because there is a game within a game at times.
Trading is hard, there are no easy fixes for most individuals. I see advertisements for systems that are 86% accurate and I am sure it is helpful for some. But it doesn’t address what happens between point A and point B, it just allows you to put it off when the system is working. Also, there are many ways to get from point A to point B and not all the right risks.
I am not saying that these systems are bad, whatever works. But I think by not dealing with loss or the idea of a loss the 14% of the time you are destined to not get the right results. Trading isn’t eliminating losses it is accepting them. Risk should be seen in the trading world as an opportunity.
A system does not make a trader the trader makes the system. Do not fall in love with percentages, some are intended to take your eyes off of risk and that never ends well.
If you have experience with those type systems leave a comment would like to know how you use it in your trading.
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