Thursday, April 06, 2006

The Holy Grail

As traders we all want to find this Holy Grail.

And if you have accepted that there is no Holy Grail in trading, listen deep enough into your mind and you will find this wish, this hope, this belief, that in fact there is a Holy Grail, that it is worth strugling, fighting day for day to find it, to reach it some day and if one day you’ve found it, you will hold it tight, you won’t let it slip from your hands again.

What is the Holy Grail? Let’s take a look at what we all try to do.

We have charts, we have fundamentals, we have Market Delta. What have these seemingly so different types of information in common?


They provide structure in an otherwise random, some might say chaotic environement. Humans have a tendency to structure, to filter. It’s the way we all are wired internally, as otherwise we are unable to cope with the amount of raw data reaching our brain each and every second through all of our senses.

And this filter is responsible for a lot of problems we have in trading. Why?

Because this filter is programmed not only by our contious mind, meaning we contiously set it up to look only for certain information, but it is also accessed and programmed by our uncontious mind. And the agenda of our uncontious mind is a lot more basic, some might say archaic, than you might think.

One of the agendas our uncontious mind has on its forefront: Avoid Pain

And pain avoidance at the most basic level comes in form of viewing the world through a filter, seeing only what we want to see and filtering the rest. If you ever were in a losing trade and looking at all the reasons, why you should stay in the trade you know what I mean.

Trading is such a difficult endeavour because you need to reprogram your internal filter to become successful. Pain avoidance by not taking a stop, by not recognising the Writing on the Wall leds to disaster.

One way to reprogram your internal filter is structuring the information you use in a way, that you have to see, what you consider important, that your internal filter can’t filter it out. That’s why KISS is so important in trading. Keep it simple, stupid.

Less information, means less things to consider, less things you are able to ignore. Everyting you see on your chart has to be important for your trade. If you can leave it away and still are able to decide, that you have a trade setup and that it means: Go long or Go Short then off it goes from your chart. You don’t need it.