Ignorance + High Risk = Checkmate

I came across a passage from Thomas Henry Huxley regarding the game of life and how it relates to trading success. I thought I would share:

“Suppose it were perfectly certain that the life and fortune of every one of us would, one day or other, depend upon his winning or losing a game of chess. Don’t you think that we should all consider it to be a primary duty to learn at least the names and the moves of the pieces; to have a notion of a gambit, and a keen eye for all the means of giving and getting out of check? Do you not think that we should look with a disapprobation amounting to scorn upon the father who allowed his son, or the state which allowed its members, to grow up without knowing a pawn from a knight?

Yet, it is a very plain and elementary truth that the life, the fortune, and the happiness of every one of us, and, more or less, of those who are connected with us, do depend upon our knowing something of the rules of a game infinitely more difficult and complicated than chess. It is a game which has been played for untold ages, every man and woman of us being one of the two players in a game of his or her own.

The chess-board is the world, the pieces are the phenomena of the universe, the rules of the game are what we call the laws of nature. The player on the other side is hidden from us. We know that his play is always fair, just, and patient. But also we know, to our cost, that he never overlooks a mistake, or makes the smallest allowance for ignorance. To the man who plays well the highest stakes are paid with that sort of overflowing generosity with which the strong shows delight in strength. And one who plays ill is checkmated—without haste, but without remorse.”

— Thomas Henry Huxley, 1825 – 1895

Particularly like the parts about the player on the other side being hidden from us and there being no allowance for ignorance, isn’t that true in trading!

Also, ‘one who plays ill is checkmated—without haste, but without remorse.’ Again, another perfect sentence for describing trading in the markets. It’s never personal, but people are checkmated and therefore wiped out every day due to ignorance or playing without proper risk management.

Without haste is exactly how it happens too. We all have choices to make, take a small loss or gamble on it being a potential big loss, but it’s never a really quick process, it just starts going down candle by candle or day by day till you are in so much emotional despair that you can’t take it anymore and get out right at the bottom, happen to anyone? Has to me…in the past!

Mat today be a profitable day for all of us!

John


Futures and Forex, a whole new world!

I just got back from Sunny LA.  I spent 4 days at Courtney Smith Futures and Forex boot camp.  While I have spent my entire trading career focused on stocks and options I felt now was the time to broaden my horizons and delve into the big boys playground of Futures and Forex.

I may have a great stock trading system that I rely on for my long term wealth, but it doesn’t mean I can’t keep learning new ways to make money in the markets.  I have always been interested in Futures and Forex and Courtney is a master trader in this field.  But beyond being a master trader, he is also a great teacher and a wonderful human being, so if you get the chance to learn from him, it comes with my highest recommendation.

The main thing that is scary yet exciting about Futures and Forex trading is the leverage.  For a non-US resident the leverage can be 200 times your money.  Now the risks at this level are very high and not for the faint of heart, but you can see why people, in particular those that are underfunded, are so attracted to the high level of leverage available.  It is of course much easier to get wiped out and then some, but if you know what you are doing and can mitigate risk it can be a fun playground to play in.

However, as a cautionary note, I learned a crazy statistic in Forex trading: 70% of all new accounts at Forex brokers are wiped out in their first year! WOW!

So, I am not recommending anyone rush out and open a futures or forex trading account, at least not until you have learned from someone like Courtney, but, in learning this side of the markets it gives you a better understanding of how economics in the world play out, fascinating stuff.

May today be a profitable day…for all of us.

John


Ever wonder why a broker is called a BROKER?

I came across a comment on one of the LinkedIn trading groups I am part of.  It was in response to a discussion on the difference between trading and Gambling.  I thought it was an excellent post so enjoy:

“Investing is placing your symbols of wealth in what you consider profitable to you or those you represent based upon guidelines and rules you use to access a potential investment. Mind you are not always right especially when you are an “outsider” and do not know what the “Whales” not the Bulls or Bears are doing or about to do.

Gambling on the other hand is just diving with little basis other than hope and greed into shark infested waters and hope you don’t get eaten….all the pundits, and other book writers have emphasized the fact that you must trade from a system you believe works for your type of investing strategies….if you wish to gamble the Racetrack is a better deal in my opinion…yet how the markets have become I would say you are in a World Wide Casino where most if not all starry eyed hopefuls enter with dreams of wealth and hitting the big jackpot….most end leaving the Casino fleeced of their wealth and winners only in the area of Experience.

The Winners are the Casino operators that have the games rigged to themselves to win no matter what the outcome is….ever wonder why a broker is called a BROKER……so be careful and razor sharp because it is a Predatory Environment that preys upon Fantasies and Rewards that are most difficult to attain….especially if you are not informed, clever, patience, and in control of your whims and addictions to the thrills of winning or the despairs of loses far beyond what you can bare……the Glitter of the World Wide Casinos is full of parasites and charlatans just waiting for their next victim to feed on.

Very well written I thought, I especially liked the part about system trading and the BROKER reference.

May today be a profitable day…for all of us.

John