Wednesday, March 24, 2010

The Most Common Problem I See Among Active Traders

The recent post on listening to market communications highlights one of the most common problems I see among active traders, particularly those that trade on a day time frame.

We've all known people who seem to talk at you rather than with you. It seems as if they're uninterested in anything you have to say. They just want to get things off their minds. Indeed, even as you're talking, you can see that they can't wait to blurt out whatever is in their heads.

Can you imagine a psychologist who interacted like that? You're trying to describe your problems, and the shrink is talking right over you with whatever psychobabble he happens to be espousing at the time. That would be quite frustrating.

Well, that is how many traders approach markets. They don't listen to what the market has to say. Instead, they're looking for the next setup, the next trade to put on.

When you sit in front of the screen, the goal should be similar to the psychologist's: to understand what is going on before you take action. If you're approaching markets with your own opinions and your own need to put on trades, you'll miss the market's communications--its evolving patterns--and any hope of getting a gut feel for the action will be gone.

I often wondered why I tended to trade well after taking a break from markets. The reason, I discovered, was that I was following markets during the break, but not trying to put on trades. That freed me up to simply hear what the markets had to say.

If you have a *need* to talk, chances are you'll be a poor conversationalist because you'll be a poor listener.

And if you have a *need* to trade, odds are you'll be tone deaf with respect to what markets are actually telling you.

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3 comments:

catou said...

thank you very much. I really recognize myself in your post. I print your words and put it on the side of my computer. Hoping next time I'll sit on my hands until I listen to the market.

Swing2Freedom said...

Oh Gosh !!
This sounded Sooooooo Like me !! >.<
Really thanks for the heads up. Thanks for making me realising my own mistakes.

Edgehunters said...

Hi Dr Brett

You have struck a nerve with this post on two levels.

One is that I have in the past been a poor listerner, as I was more interested in getting my point across. I now conciously monitor myself on that very topic.

However I had never associated the same problem with the markets and I think it is an extremely valuable point.

Thank you.

Mark