You have just started trading forex and you feel that this is what you've been looking for your entire life. You then find about automated trading systems and you think - "this cannot get any better". What makes people believe that absurd profit targets are possible and that a hands-free system could turn a few dollars into millions within just a few months or years ? What makes people think they can get away with this when practical experience shows that this has never been the case ? On today's post I will explore the reasons why people - time after time - take bad trading decisions in the forex market and specifically why they neglect advice from more experienced traders who attempt to provide guidance. You will see why following advice in forex trading is so hard and why almost no one will be able to take short cuts through other people's experience.
My step father has always been a very intriguing person. A trained medical doctor with more than 30 years of experience in gastroenterology, he is what I would call a rational person who can understand and listen to arguments. However, he does buy one lottery ticket every week knowing that his odds of winning are roughly 1 in 8 million. Last year I told him that if what he wanted to do was indeed win the lottery, it was better to spend all the money he would have spend in lottery tickets for the year on one single event since this way the probability to win would be 52 times higher, roughly 1 in 15K. My advice with a sound and strong statistical background was simply laughed at and discarded.
Why do people tend to discard advice that would increase their probabilities of making money in the long term higher ? Why is it so hard to listen ? Why do new forex traders do not take advice from much more experienced traders ? In the following paragraphs I will share with you the 5 main reasons why I think this is the case, showing you why this happens and why it is likely to continue to happen as long as there are new traders.
1. The "I am special" problem. When you enter a market where the bast majority of people lose their first account and almost nobody seems to be living from automated trading people have to resort to some defense mechanism to be able to buy into something that is evidently not as good as portrayed. People then start to believe that "most people lose but I'll make it", "I'll find the system that works", etc. The truth my friend is that neither you or me are ANY especial and if something is not working for most then the largest probability is that it will not work for you or me either. However new traders often believe that there is something "special" about them and therefore they neglect to take advice because "they will do what that experience trader couldn't", etc. Even though this could be the case, the largest probability is that it will not.
2. The greed bug. Perhaps almost deserving a post on its own, the "greed bug" is the largest reason why traders neglect to listen to more experienced people. They want to achieve huge profit targets in small amounts of time and they will not listen to anyone that attempts to tell them this is not possible. The argument here is most of the time "the fact that he/she couldn't do it doesn't mean that I will not" but the reality here is not only that one experienced trader wasn't able to achieve it but simply that no one has been able to pull this off in a sustained manner. As the saying goes, there are old and bold traders but no old bold traders.
3. The problem of what seems possible. Even though there is no one I have ever seen who can show a track record of ten years with huge profits and small draw downs, the fact is that new traders see this as possible due to the fact that it seems this way. Many people are able to achieve 100-200% profit levels on some months (of course later on wipe-outs arrive) but inexperienced traders tend to believe that "if only they could reproduce that successful month" they would achieve their goal. They fail to listen to more experienced traders because they believe they have the "key" nobody else has and the fact that having a few months of high profitability is possible should "prove" that it is indeed possible and that experienced traders are just sore losers.
4. Small risk, huge potential. Another reason why new traders neglect to take the advice of more experienced people is the fact that the risk is often small but the potential seems huge. You are risking just 100 or 1000 USD to trade a system that you see in simulations can turn that into millions of dollars within 10 years. What is it there to lose ? 100 USD against 10 million ? who wouldn't take that chance ! However the reality is that the chance of the system working are 0 and this potential is just an illusion. Nonetheless, for as long as there is something that remotely suggests this is possible new traders will keep on saying, "small risk, huge potential", when in reality no one has ever cashed on this promise.
5. Keeping the dream alive. New traders are often charmed by the fact that forex may be their gate towards a hands-free income with unlimited potential and small temporary loses. When someone tells them that this is not possible and that very hard work, effort and understanding is needed to even achieve the most conservative long term profit targets they will feel depressed. It is far easier to ditch this advice as being "close minded and sore loser type" than to realize that there is simply no free lunch and that if it was so easy, possible and straightforward all your neighbors would have been doing it for years.
Of course, I was also a new trader sometime and I know what it is to ignore experienced trader advice and to think "I am special" and "this will work for me". Although I believe that for the above reasons it is almost impossible for new traders to listen to and take in advice I also know that traders who stay in this game long enough will realize through their own monetary loss that the things they were told in the beginning were nothing but the most transparent truths. Right now I know I would have been very wise to take the advice that was offered to me when I started trading but obviously every experienced trader will tell you this in hindsight.
Sadly it seems to be a characteristic of this game that it is extremely hard to cut corners and learn from other traders' experience. The above reasons will make new traders ignore experienced advice until they learn that advice to be true through their own experience. They will have to go through the "I will give it a shot" phase and then come back with some financial loss and knowledge behind their backs. For some this process will never end and they will take shots at the dream until they are drained and convinced that "profitable trading does not exist" while others will eventually make the change and start to get onto the road of long term profitability with realistic profit and draw down expectations.
If you would like to learn more about my journey in automated trading and how you too can start to build and design your own likely long term profitable systems please consider joining Asirikuy.com, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach to trading systems. I hope you enjoyed this article ! :o)
My step father has always been a very intriguing person. A trained medical doctor with more than 30 years of experience in gastroenterology, he is what I would call a rational person who can understand and listen to arguments. However, he does buy one lottery ticket every week knowing that his odds of winning are roughly 1 in 8 million. Last year I told him that if what he wanted to do was indeed win the lottery, it was better to spend all the money he would have spend in lottery tickets for the year on one single event since this way the probability to win would be 52 times higher, roughly 1 in 15K. My advice with a sound and strong statistical background was simply laughed at and discarded.
Why do people tend to discard advice that would increase their probabilities of making money in the long term higher ? Why is it so hard to listen ? Why do new forex traders do not take advice from much more experienced traders ? In the following paragraphs I will share with you the 5 main reasons why I think this is the case, showing you why this happens and why it is likely to continue to happen as long as there are new traders.
1. The "I am special" problem. When you enter a market where the bast majority of people lose their first account and almost nobody seems to be living from automated trading people have to resort to some defense mechanism to be able to buy into something that is evidently not as good as portrayed. People then start to believe that "most people lose but I'll make it", "I'll find the system that works", etc. The truth my friend is that neither you or me are ANY especial and if something is not working for most then the largest probability is that it will not work for you or me either. However new traders often believe that there is something "special" about them and therefore they neglect to take advice because "they will do what that experience trader couldn't", etc. Even though this could be the case, the largest probability is that it will not.
2. The greed bug. Perhaps almost deserving a post on its own, the "greed bug" is the largest reason why traders neglect to listen to more experienced people. They want to achieve huge profit targets in small amounts of time and they will not listen to anyone that attempts to tell them this is not possible. The argument here is most of the time "the fact that he/she couldn't do it doesn't mean that I will not" but the reality here is not only that one experienced trader wasn't able to achieve it but simply that no one has been able to pull this off in a sustained manner. As the saying goes, there are old and bold traders but no old bold traders.
3. The problem of what seems possible. Even though there is no one I have ever seen who can show a track record of ten years with huge profits and small draw downs, the fact is that new traders see this as possible due to the fact that it seems this way. Many people are able to achieve 100-200% profit levels on some months (of course later on wipe-outs arrive) but inexperienced traders tend to believe that "if only they could reproduce that successful month" they would achieve their goal. They fail to listen to more experienced traders because they believe they have the "key" nobody else has and the fact that having a few months of high profitability is possible should "prove" that it is indeed possible and that experienced traders are just sore losers.
4. Small risk, huge potential. Another reason why new traders neglect to take the advice of more experienced people is the fact that the risk is often small but the potential seems huge. You are risking just 100 or 1000 USD to trade a system that you see in simulations can turn that into millions of dollars within 10 years. What is it there to lose ? 100 USD against 10 million ? who wouldn't take that chance ! However the reality is that the chance of the system working are 0 and this potential is just an illusion. Nonetheless, for as long as there is something that remotely suggests this is possible new traders will keep on saying, "small risk, huge potential", when in reality no one has ever cashed on this promise.
5. Keeping the dream alive. New traders are often charmed by the fact that forex may be their gate towards a hands-free income with unlimited potential and small temporary loses. When someone tells them that this is not possible and that very hard work, effort and understanding is needed to even achieve the most conservative long term profit targets they will feel depressed. It is far easier to ditch this advice as being "close minded and sore loser type" than to realize that there is simply no free lunch and that if it was so easy, possible and straightforward all your neighbors would have been doing it for years.
Of course, I was also a new trader sometime and I know what it is to ignore experienced trader advice and to think "I am special" and "this will work for me". Although I believe that for the above reasons it is almost impossible for new traders to listen to and take in advice I also know that traders who stay in this game long enough will realize through their own monetary loss that the things they were told in the beginning were nothing but the most transparent truths. Right now I know I would have been very wise to take the advice that was offered to me when I started trading but obviously every experienced trader will tell you this in hindsight.
Sadly it seems to be a characteristic of this game that it is extremely hard to cut corners and learn from other traders' experience. The above reasons will make new traders ignore experienced advice until they learn that advice to be true through their own experience. They will have to go through the "I will give it a shot" phase and then come back with some financial loss and knowledge behind their backs. For some this process will never end and they will take shots at the dream until they are drained and convinced that "profitable trading does not exist" while others will eventually make the change and start to get onto the road of long term profitability with realistic profit and draw down expectations.
If you would like to learn more about my journey in automated trading and how you too can start to build and design your own likely long term profitable systems please consider joining Asirikuy.com, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach to trading systems. I hope you enjoyed this article ! :o)
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1 comment:
A person left a comment sometime ago about a guy who said he could turn 10K into 1 million in a year asking me if I considered this possible. I deleted the comment due to the link (which could mean it was spam) but I consider the question worth answering.
The short answer is - where is the proof ? Until someone shows that in fact this WAS done with real money it remains in the realm of fiction. Period. Obviously this guy shows no proof whatsoever.
Thank you very much again for your comment and sorry for deleting it but I don't allow comments with links that point to commercial products (just a way to avoid affiliate marketers filling the website with spam).
Best Regards,
Daniel
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