The Market Holy Grail: Fact or Fiction?
What Does This Mean?
Wait a minute; we can’t be serious, can
we? Well let us think about it for a while. Think back to the last
time you tried to trade a ‘Holy Grail’ system or a
system you researched and back tested yourself. If it failed how
many of the following weaknesses hindered your efforts:
Inexperience: No matter how many
times you read that trading manual nothing can prepare you for
live trade. As all of your indicators begin to line up you get
confused, miss signals and react too quickly or too late. After
your first hectic day you realise that your strategy was OK and
you can attribute your loss to your lack of experience.
Greed: Buying a strategy almost
inevitably comes with a statement telling you how you can make
a boatload of money with relatively little work. When designing
your own strategy you will automatically look for the highest winning
ratio rather than best risk/ reward. This will lead to classic
over trading (if you are destined to win why not increase your
earnings by trading more), inability to cut losses (your strategy
predicts market direction so all you have to do is wait and this
loss will turn into a profit) and believing the market will move
further in your direction than it actually does (setting a target
that gives you as much profit as you want rather than as much profit
as the market can give you).
Fear: After being burned a few times by the
greed and inexperienced stage you will have probably changed
strategies at least once. After all it isn’t your fault it must just
be a dodgy strategy. Now it is time to hit the books and find another
combination of indicators to use. The more you learn the more indicators
you can find that help you make money. Or if you prefer to buy
another ‘Grail’ system it must be more complicated
like something the professionals use.
Unfortunately all of the extra knowledge, indicators and complication
leave you almost paralysed when it comes to entering a trade. Coupled
with the losses you incurred during your ‘greed phase’ entering
a trade becomes scary. That moment of doubt where you question
your indicators or the market’s recent behaviour causes you
to miss your entry and forget about the trade altogether. As you
know only too well this trade was the best of the day or possibly
even the whole week!
Another common mistake associated with fear is late entry. All
of the characteristics of complete failure to enter are there but
rather than miss the trade completely you enter late. This completely
destroys your risk reward and an unsuccessful trade costs you much
more than it would if you had entered at the correct time.
Just when you thought fear could only influence your entries it
turns around and has a bite at your exits too. Exiting too early
can cause you to take an unnecessary loss. Picture the trade: you
enter correctly and the market moves a little way in your direction.
All of a sudden the market turns around hard and your position
starts to represent a loss. Rather than sticking to your stop
loss (your defined risk) you exit early and think that you
have saves yourself some financial pain. Just as you exit or just
before your stop loss is triggered the market turns on its heels
and ends up reaching your initial target.
Scenario two causes you to take your profit too early. The market
approaches your target and goes through a natural correction. As
you see the market eat into your profit you decide enough is enough
and you get out while you are still in the black. Of course the
market resumes its initial direction and hits your original target.
Fear will cause you to develop a lack of faith in your chosen method.
Depending on how many times this has happened before you will either
go back to the drawing board with your method or lose faith in
your ability to trade at all. You start to believe that surely
nobody makes money from trading.
This is the point at which many traders have what they call the ‘aha
moment’. All of a sudden it becomes clear that successful
trading isn’t down to the system at all it is down to the
person using the system. This is the moment when each trader realises
where the Grail can be found.
Contents:
1.Introduction
2. What The Market Holy Grail Is Not
3. So What Is It?
4. What Does This Mean?
Next:
5. Finding
The Grail
