For Best Results Trade Blindly
Whenever I am in a new city I like nothing more than to just step out of my hotel and walk aimlessly for hours to get the lay of the land. That exactly what I did last l week when I was in Madrid at my good friend’s David Aranzabal’s 2nd annual Forex Day expo. In fact I dragged Rob Booker with me and by the end of the trip we knew how to get around center city with.
I did the same thing this weekend in the Hamptons (dragged there by Hedge Fund girl who insisted on a family vacation). I turned off the GPS and simply drove around until I got a clear layout of East Hampton in my head.
Walking around blindly is one of the best ways to learn how to navigate. That’s because if you don’t want get completely lost you must pay attention. You will no doubt make mistakes, but if you are focusing on the task you will correct them quickly. Not only that, but you will also remember the proper path much, much, much better than if you simply relied on maps or GPS in your phone.
That’s why when new traders ask me for advice on the best way to trade I tell them to simply open up their platform and click away. Trading like navigation, is the art of pattern recognition and therefore requires lots of practice in order to understand your environment -- be it physical or financial.
Of course this advice comes with some common sense precautions. I am happy to walk around the capitals of G-20 countries where my security is relatively assured, but I would not step out in the middle of Baghdad and say to myself, “Hey I wonder where that narrow alley leads to?”
The point is that just as with navigation and exploration, in trading you need to take calculated risks only. That means first and foremost trade small ( think of it as taking baby steps). Secondly always trade with stops (think of this as your personal 911 emergency number). Thirdly, always trust your gut. If for any reason you sense danger either on your walkabout or in your trade -- get the f** out! In life as in trading it is always better to look like a panicky idiot in retrospect than to suffer serious damage just to prove how brave you are.
Overall however, there is just no better way to learn to trade than by doing. Speculation is observation as someone once noted. You can read all the books that you want, follow as many gurus as possible, but ultimately, if you want to stop being a tourist and start being a traveler you need to learn how to explore for yourself.