Here's a simple
question-what is trading? To answer, perhaps not so
simply, we first need to understand what trading is
NOT. Trading isn't about buying the fanciest chart,
hanging on to something because it is a good buy, or
feeling good about yourself because you can go to a
cocktail party and relate to what everyone else is
saying. Trading is about making money, period.
There are software systems that create pretty
colors and tell you which stocks are safe to buy
because they have moved a certain way in the past.
If one particular stock has been going up and up and
up, a trend follower concludes that the stock should
continue moving UP! However, in order to follow a
stock's true potential progress, would you rather
wait for a computer program, or be actively and
directly involved in its ascent?
Picture an apple in the center of a room,
surrounded by 10 traders. Consider for a moment,
each trader buying the apple until everyone has
owned it. What is that apple worth? It is worth ONLY
what someone will pay for it. Person #1 buys the
apple for $1 and takes a bite. Person #2 then pays
$2 for the same apple and takes another bite. Person
#3 pays $3, and so on until finally, the last person
takes that final bite. Yes, the apple is STILL worth
only what the next person will pay for it-no more,
and certainly no less. The only person left to sell
it to is the one who walked into the room an hour
late, looks at the apple's past price history,
consults his software that says the smelly apple has
had a great price performance, and determines that
it's a worthwhile buy. That is precisely the
definition of trend trading.
Make no mistake, successful trading is about you
versus the guy sitting next to you with the pretty
software. Don't waist your time trading with charts,
spend your time leaning how the futures market
really work.
