The reasons traders would give for their actions are irrelevant. Most traders
don't know why they did what they did because most traders don't plan their
trades, thus eliminating any connection between themselves and the results of
their trades. Most traders act spontaneously and impulsively and then ascribe the
rationale for their behavior after the fact. Most of these after-the fact reasons are
either justifications for what traders did or excuses for what traders didn't do.
In fact, traders who are confident in their ability and know they can have a significant impact on price movement go to great lengths to keep information about their plans away from other traders because that would diminish the possibility of executing these plans. However, this is not to say that after they have taken their positions they won't purposely reveal what they have done to then draw other traders into the same position, forcing them to compete among each other to create price movement in their direction. On the other hand, traders who are not confident about what they want to do will gladly share their trading ideas with anyone who will listen, hoping to get some sort of confirmation that what they are about to do will work.
WHY DO WE TRADE?
We express ourselves to fulfill our needs, wants, desires, and goals. Today most individuals can channel their energies to fulfill needs beyond the requirements of food and shelter, but to do so requires money.
Money allows for a system of exchange where we can trade the goods and services created from individuals expressing themselves in highly specialized ways.
All behavior is a form of self-expression, and almost any way in which an individual wants to express himself in our society requires money. So at the most fundamental level of cultural existence, money represents freedom of expression.
The law of supply and demand is founded in human fear and greed. Both fear and greed will compel people to act or not act depending on their needs in relation to the perceived external conditions.
Greed stems from a belief that there is never enough or there won't be enough. In an unlimited environment that is in perpetual motion, isn't there always the possibility of getting more?
The appetite of true greed can never be satisfied; it will always leave the greedy ones with a feeling of lacking regardless of how much they have acquired. If you are in a losing trade, you won't want it to exist because it represents failure, so you can just act as if it doesn't, by convincing yourself that you are in a winning trade that hasn't gone in your favor yet.
The "how much is enough" question can be answered in an infinite number of ways relative to your beliefs on the value of money, what you need it for, how important it is, can you really risk it, how secure do you feel, and what is enough today may not be enough tomorrow because of other factors in your life—all relative questions that have no definitive answers and change with the changing environmental conditions. Having to confront these personal issues as a trader will only contaminate your observations of market movement because they have nothing to do with market direction and the potential or lack of potential of any particular market move.
This is why successful traders have always stated emphatically, "Only trade with money you can afford to lose," meaning money that has little or no value in your life. The less meaning the money has, the less potential there is for your personal "how much is enough" issues to contaminate your perception of market movement.
The behavior someone displays will be consistent with what they believe they must do to satisfy the deficit. If two or more people have the same fears, they will typically compete among one another for the existing supply.
If the supply of something is limited in relationship to the need, those that are in need will compete for the available supply. They will compete by their willingness to exchange more resources (pay more money) than will someone else who may also be in need. If, however, the supply is great in relationship to the need (demand), there will be no fear of scarcity; consequently, people will conserve their resources (money) by diverting them to other needs or just waiting for the possibility that the price may come down.
What is risk? Risk is the possibility of a net loss of personal resources (energy, money etc.) in the exchange or pursuit of fulfilling a need.
DEFINITION OF TRADING
I define trading as two parties exchanging something of value to fulfill some need or goal. In the context of the stock or futures markets, participants trade for the sole purpose of accumulating wealth or protecting physical assets from deteriorating in value. In essence, all traders in these markets, whether they are labeled speculators or hedgers, trade to accumulate wealth; it is only a matter of perspective. For the hedger the motivation to protect the value of an asset from economic risk is still to accumulate wealth.
Since the goal of a trader is to satisfy a need to accumulate wealth, we can assume that people will not consciously enter into a trade believing they will lose or fail at satisfying their needs. Because all traders have basically the same goals (to win), we can then state that no two traders enter into a trade unless they have opposing beliefs about the future value of whatever is being traded. Keep in mind that the current price of anything is always a reflection of what someone is willing to pay and what someone is willing to sell for in that moment.
In fact, traders who are confident in their ability and know they can have a significant impact on price movement go to great lengths to keep information about their plans away from other traders because that would diminish the possibility of executing these plans. However, this is not to say that after they have taken their positions they won't purposely reveal what they have done to then draw other traders into the same position, forcing them to compete among each other to create price movement in their direction. On the other hand, traders who are not confident about what they want to do will gladly share their trading ideas with anyone who will listen, hoping to get some sort of confirmation that what they are about to do will work.
WHY DO WE TRADE?
We express ourselves to fulfill our needs, wants, desires, and goals. Today most individuals can channel their energies to fulfill needs beyond the requirements of food and shelter, but to do so requires money.
Money allows for a system of exchange where we can trade the goods and services created from individuals expressing themselves in highly specialized ways.
All behavior is a form of self-expression, and almost any way in which an individual wants to express himself in our society requires money. So at the most fundamental level of cultural existence, money represents freedom of expression.
The law of supply and demand is founded in human fear and greed. Both fear and greed will compel people to act or not act depending on their needs in relation to the perceived external conditions.
Greed stems from a belief that there is never enough or there won't be enough. In an unlimited environment that is in perpetual motion, isn't there always the possibility of getting more?
The appetite of true greed can never be satisfied; it will always leave the greedy ones with a feeling of lacking regardless of how much they have acquired. If you are in a losing trade, you won't want it to exist because it represents failure, so you can just act as if it doesn't, by convincing yourself that you are in a winning trade that hasn't gone in your favor yet.
The "how much is enough" question can be answered in an infinite number of ways relative to your beliefs on the value of money, what you need it for, how important it is, can you really risk it, how secure do you feel, and what is enough today may not be enough tomorrow because of other factors in your life—all relative questions that have no definitive answers and change with the changing environmental conditions. Having to confront these personal issues as a trader will only contaminate your observations of market movement because they have nothing to do with market direction and the potential or lack of potential of any particular market move.
This is why successful traders have always stated emphatically, "Only trade with money you can afford to lose," meaning money that has little or no value in your life. The less meaning the money has, the less potential there is for your personal "how much is enough" issues to contaminate your perception of market movement.
The behavior someone displays will be consistent with what they believe they must do to satisfy the deficit. If two or more people have the same fears, they will typically compete among one another for the existing supply.
If the supply of something is limited in relationship to the need, those that are in need will compete for the available supply. They will compete by their willingness to exchange more resources (pay more money) than will someone else who may also be in need. If, however, the supply is great in relationship to the need (demand), there will be no fear of scarcity; consequently, people will conserve their resources (money) by diverting them to other needs or just waiting for the possibility that the price may come down.
What is risk? Risk is the possibility of a net loss of personal resources (energy, money etc.) in the exchange or pursuit of fulfilling a need.
DEFINITION OF TRADING
I define trading as two parties exchanging something of value to fulfill some need or goal. In the context of the stock or futures markets, participants trade for the sole purpose of accumulating wealth or protecting physical assets from deteriorating in value. In essence, all traders in these markets, whether they are labeled speculators or hedgers, trade to accumulate wealth; it is only a matter of perspective. For the hedger the motivation to protect the value of an asset from economic risk is still to accumulate wealth.
Since the goal of a trader is to satisfy a need to accumulate wealth, we can assume that people will not consciously enter into a trade believing they will lose or fail at satisfying their needs. Because all traders have basically the same goals (to win), we can then state that no two traders enter into a trade unless they have opposing beliefs about the future value of whatever is being traded. Keep in mind that the current price of anything is always a reflection of what someone is willing to pay and what someone is willing to sell for in that moment.
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