Costly Trading Mistake #4 (And How To IMMEDIATELY Fix It)
Relying on Technology Instead of Learning How To Trade
Information overload is a problem, not a solution. Most unsuccessful traders think more information will make them a better trader and never take the time to learn how to trade.
Today, software, data and market information is cheap. When I started to trade in the mid-80's, most traders did not have a computer or trading software. Those who did, paid hundreds of dollars a month for the software and data. Back then, most of us traders drew our charts by hand each day on graph paper. Some of us either sat in the broker's office or had a DTN or other steaming data at home and made intraday charts by hand as well.
Today, trading software and data are very cheap. They have become so inexpensive, that the cost of data and trading software is hardly a relevant cost for a trader. Many traders become software junkies thinking they can buy success with a trading program and not actually have to learn how to trade and make trading decisions. BIG MISTAKE!
No Amount of Technology Will Make You Successful
Today's cheap and abundant technology and plethora of trading software and cheap data is not a substitute for learning how to trade. No software program, advisor or any amount of data will make you a successful trader. Only the knowledge of how to distinguish which information is useful and relevant and how to apply the information to make low-risk and high-probability trade decisions will help make you a successful trader. Trading is exactly like every other business. To be successful, you must have knowledge, information and make decisions based on a plan and experience.
Trading software and data began to get very available and cheap to the small retail trader in the early 90's. Plus, index, stock and Forex trading have become very popular in the last ten years, adding 10's of thousands of active traders. Yet, with all the new technology, cheap data and information that was only available to major institutions a decade or so ago, the percentage of successful traders has not increased!
Brokerage companies still report that only about 20%-30% of accounts are profitable after a year of trading, the same as the "old" days of hand charting data at the end of the day! I suspect if the data was available to do a thorough study of trading results going back to at least the early 80's, we would find the percentage of successful traders is actually less today than in the pre-technology days.
You Can't Buy Success
No matter how much technology, information and data you have, you will not be successful if you don't know what makes a market trend, what are the key characteristics of a successful trading business, how to develop and execute a trading plan and much more. In other words, just like every other business, you have to gain knowledge and experience and take risks in order to have the opportunity to be successful.
A while back I gave a talk at a large, local trading group for their monthly meeting one evening. After the talk, several of the group members and I were having a cocktail and someone started a discussion about how many monitors they had on their trading desk. Pretty soon it was a friendly "I've got more monitors than you" competition. Someone asked me how many trading monitors I had. I said one. Everyone fell silent. I guess they thought since I was the "guru" of the hour, I would have a desk full of monitors with all kinds of data feeds. I explained to them that I only look at a handful of markets at any time. Before the first tick of the day, I have the trading plan for the day which means I have identified what conditions must be met to consider a trade. It is just a matter of executing the trade if the conditions are met.
You can't buy success. Most traders have way too much information which causes paralysis of analysis. More importantly, much of the information traders have is not relevant to making a low-risk, high-probability trade decision.
How To IMMEDIATELY Fix This Mistake
Immediately begin to eliminate all information that you cannot specifically identify has been consistently useful to making profitable trade decisions.
Most traders need less information, not more. Decide what are the three or four pieces of information you need to make a trading decision. If you think you need more information, you definitely have too much irrelevant or misleading information. For at least one week, shut down all information flow that provides any information that is not part of the three or four pieces of information critical for your trading decisions. Make all your decisions based on the reduced information. You will probably look at fewer markets. You will probably make more relaxed decisions. You will probably have more profitable results.
