Did you learn how to drive a car by reading a book?
Do pilots learn how to fly by reading a book?
Well trying to teach someone all the ins and outs of trading via a website/book/writeup is like trying to teach brain surgery with a book.
Trading is a highly complex skill like brain surgery and you can't learn how to perform brain surgery by reading about it, and you ultimately can't learn to be a successful trader by reading about it or scouring the web trying to piece together free information.
Essentially people shouldn't try to "self-educate" and learn how to trade on their own.
At a gut level we all know you can't learn how to be a successful trader purely from a book. That's an absurd assumption and it would be similar to thinking we can learn how to perform surgery on someone from reading a book or two.
We may have the mechanics down, but would YOU let someone perform brain surgery on you if you knew they learned how to do so from reading a book?
Trading is a skill where you need some kind of coaching or mentorship, but that's what I think, ultimately it's your life and only you can decide that.
Change the topic.
Human instincts are often wrong and you must learn to resist these feelings that will lose you money. The way probability works is important to trading but is different than your natural instincts will lead you to believe. The Gambler's fallacy, also known as the fallacy of the maturity of chances is the belief that your odds improve when an unusual series of losses occur or that your odds of winning rises when you have a losing streak.
Let's look at a coin flip example:
if you are flipping a coin and you get "heads" four times in a row then your chances of getting "tails" on the next coin toss has improved. However, each coin toss is an independent event that is ignorant of every previous coin toss. Since the coin does not remember the previous string of heads it is not biased in the next toss.
If fifty different people toss a coin in the air eight different times then the probability of at least one person getting all heads or tails is 32.44%. That person with all heads (or tails) probably had difficulty accepting the outcome but it is no less probable that the person who had exactly 25 heads and 25 tails which were evenly distributed.
Another example of how human intuition is wrong is the Monte Hall paradox and Bertrand's box paradox.
You are in a game show, and you're given the choice of three doors: Behind one door is Rs. 1,000; behind the others, Re. 1. You pick door No. 1, and the host (who knows the right answer) opens door No. 3, which has Re.1. He then says to you, "Do you want to pick door No. 2?" Should you switch your choice from Door No. 1 to Door No. 2? Most people would say no because their chance has not seemingly changed and Door No. 2 does not seem to offer any improvement in their chance of winning. People are more inclined to stay with their choice once made. Staying with your choice leaves you with a 1/3 chance of winning but changing to door No.2 increases your chances to 2/3. It is surprising and not at all intuitive but it has been shown to be true (hence the term "paradox"). As a trader you should learn what is true and re-train yourself to these truths while avoiding use of your natural human instinct. Why something works in trading is unimportant, that is an academic exercise for the curious; the fact that it works is all you need to know.
For many people it is hard to exit a losing trade and accept defeat. People who have been reasonably successful in their life would rather hang in there and work that defeat into a victory. This is a recipe for disaster in trading. After several disasters the aspiring trader then over reacts and starts exiting too soon. They want to exit a trade if there is any loss showing at all because the pain of past disasters puts them in a panic. Knowing how to trade means limiting your losers and giving your winners room to run.
Do pilots learn how to fly by reading a book?
Well trying to teach someone all the ins and outs of trading via a website/book/writeup is like trying to teach brain surgery with a book.
Trading is a highly complex skill like brain surgery and you can't learn how to perform brain surgery by reading about it, and you ultimately can't learn to be a successful trader by reading about it or scouring the web trying to piece together free information.
Essentially people shouldn't try to "self-educate" and learn how to trade on their own.
At a gut level we all know you can't learn how to be a successful trader purely from a book. That's an absurd assumption and it would be similar to thinking we can learn how to perform surgery on someone from reading a book or two.
We may have the mechanics down, but would YOU let someone perform brain surgery on you if you knew they learned how to do so from reading a book?
Trading is a skill where you need some kind of coaching or mentorship, but that's what I think, ultimately it's your life and only you can decide that.
Change the topic.
Human instincts are often wrong and you must learn to resist these feelings that will lose you money. The way probability works is important to trading but is different than your natural instincts will lead you to believe. The Gambler's fallacy, also known as the fallacy of the maturity of chances is the belief that your odds improve when an unusual series of losses occur or that your odds of winning rises when you have a losing streak.
Let's look at a coin flip example:
if you are flipping a coin and you get "heads" four times in a row then your chances of getting "tails" on the next coin toss has improved. However, each coin toss is an independent event that is ignorant of every previous coin toss. Since the coin does not remember the previous string of heads it is not biased in the next toss.
If fifty different people toss a coin in the air eight different times then the probability of at least one person getting all heads or tails is 32.44%. That person with all heads (or tails) probably had difficulty accepting the outcome but it is no less probable that the person who had exactly 25 heads and 25 tails which were evenly distributed.
Another example of how human intuition is wrong is the Monte Hall paradox and Bertrand's box paradox.
You are in a game show, and you're given the choice of three doors: Behind one door is Rs. 1,000; behind the others, Re. 1. You pick door No. 1, and the host (who knows the right answer) opens door No. 3, which has Re.1. He then says to you, "Do you want to pick door No. 2?" Should you switch your choice from Door No. 1 to Door No. 2? Most people would say no because their chance has not seemingly changed and Door No. 2 does not seem to offer any improvement in their chance of winning. People are more inclined to stay with their choice once made. Staying with your choice leaves you with a 1/3 chance of winning but changing to door No.2 increases your chances to 2/3. It is surprising and not at all intuitive but it has been shown to be true (hence the term "paradox"). As a trader you should learn what is true and re-train yourself to these truths while avoiding use of your natural human instinct. Why something works in trading is unimportant, that is an academic exercise for the curious; the fact that it works is all you need to know.
For many people it is hard to exit a losing trade and accept defeat. People who have been reasonably successful in their life would rather hang in there and work that defeat into a victory. This is a recipe for disaster in trading. After several disasters the aspiring trader then over reacts and starts exiting too soon. They want to exit a trade if there is any loss showing at all because the pain of past disasters puts them in a panic. Knowing how to trade means limiting your losers and giving your winners room to run.
