It’s not in our human nature to embrace the unknown, it scares the shit out of us. When we are confronted by it, we ignore it, we run away from it, we label it in a way that allows us to dismiss it. Just think of taxes, credit card debt or trying something that scares you, you might already be feeling the pressure just thinking about it. This is why trading can seem so difficult from afar as there are so many unknowns. Yet when you peek behind the curtain, or step into the game with the right game plan you can see it isn't as scary as you maybe once thought.
When it comes to trading there are known knowns, known unknowns, and unknown unknowns. Known knowns are things such as if $50 has been resistance in a stock for 10 years then above $50 there should be a major breakout (things we heavily focus on). Then there are known unknowns that we know exist yet but we don't know how they work, such as when the stock breaks $50 how will it get to $70? (things you will learn as you continue to read). Then there are unknown unknowns, those are the black swans, those are the stocks that get bought out for 100% over their market price, the stocks that go bankrupt due to fraud or due to other major headline news of the day that you see and say “if only I got in (or out) yesterday I would have killed it”. Sometimes we get lucky and catch the good side of a black swan event such as KITE getting bought out by GILD that resulted in a 140% profit in 3 months, or the other side of the black swan events such as getting out of ADMS a day before the start of a 100% rally in less than a month’s time.
This is why trading can be as hard or as easy as you make it out to be, either you're the half full or half empty type of trader. Most traders can be separated into two categories, either there are endless opportunities or no opportunities. The ones who feel there are endless opportunities tend to be the ones doing the work while the latter are the ones watching CNBC complaining that the DOW is down 300 points (which is inconsequential when the DOW is at 25,000 points).
Now during the easy times, the pendulum tends to lean towards endless opportunities as all you really have to do is put risk on. However when the market gets shaky and the pressure is applied those traders quickly buckle and run for cover. As a trader you have to be conscious of what you're doing, however you cannot be overly obsessed with the technique of doing it. Trading is a fluid process as there is never a perfect trade. Your goal is to find high probability setups with a risk reward that is in your favor (5-1 or better), follow your game plan and repeat that process over and over. You learn from your fuck ups and your successes keep you in the game. You have to take the good with the bad and as a professional trader, we are wrong more often than we are right. That means a lot of lessons and few successes however our lessons are not costly, think of them as the cost of guac on your taco while our successes pay for another Rolex Day Date 42 with the coin face bezel. The new trader tends to do the opposite where they’re willing to boast about risking a Rolex for a side of guac.
Every trade is just another trade regardless of the timeframe, there are no Super bowl trades, there are all just trades. When the pressure is really on, you’ve got to be yourself. It has to be the best version of yourself that you can be, and it has to be you. You cannot play outside your range. Forget the prestige of your broker or who you want to brag to about your winning, take the trade and cheerlead after you’re out. When under pressure, if you obsess over something that is hard to swallow, you’re ultimately going to choke.
“People trip over pebbles, not mountains.”
No matter what you decide to do, there will always be someone to tell you, you are wrong. There will always be difficulties arising that make the easy road look appealing if you give into your critics. You need to map out a course of action and follow it to the end which requires the same courage that a soldier needs. Peace has it's victories, however, it takes courageous men (and women) to win them.
“Whatever you do, you need courage.”
Do you have balls?
In the Group Chat share a time when you experienced a black swan event in your life, when something happened that you just could not imagining ever happening (this is not just specific to trading).