I was driving in my car the other night with my twin daughters when the conversation somehow turned to what they wanted to do when they grow up.
Naturally, being only nine years old, they had many ideas. There were those that I was very happy with – an astronomer, a veterinarian, a professional soccer player, or a guitarist in a rock band. And there were some suggestions that I just didn’t like at all. Not that it’s my decision! I’ll naturally support them in whichever path they chose for their life; however let’s just say a nine year old should not know what a Forensic Scientist does.
I asked if either were interested in trading, to which Caitlin replied, “But isn’t trading just guessing?”
That was unexpected! I was a little taken aback and frankly quite annoyed that she thought that all I did was ‘guessing’. I replied by explaining that there was a lot more to trading than just guessing which way the market went. But the conversation quickly moved on to other areas, as appears normal when speaking with nine year olds.
That night I put a little more thought to our discussion, not so much out of concern about my daughter’s perception of my career, but rather my emotional reaction to her statement. Why should I allow myself to feel a little insulted by claims that all I do is ‘guess’ market direction?
What do I actually do in the markets?
I assume risk in the markets, with an expectation of profits. But surely it’s not just guessing, or gambling, or taking a punt. I take positions on my terms only. It’s a calculated business decision. Through skillful analysis of past and current price action and an assessment of likely future price action I am able to identify opportunities to profit from market trends. And I combine this with action designed to reduce or eliminate any risk while seeking to maximize that profit. This is no different to any other business.
I’ve been lucky enough to be involved in a number of other ‘cool’ careers, but nothing has satisfied that need within my soul for a meaningful existence like being a trader does.
And I certainly believe that the career of a trader does provide significant benefits for society (a subject for another future article perhaps).
But when you really get down to the nuts and bolts, is what I do any different from guessing?
The definition of guessing according to the American Heritage Dictionary* is:
- To predict (a result or an event) without sufficient information.
- To assume, presume, or assert (a fact) without sufficient information.
The common point here is ‘without sufficient information’, a phrase which certainly applies to the world of market analysis.
A novice trader expects that certainty can be found through better analysis or better indicators or indicator parameters. And so they get stuck for several years on this search for the Holy Grail solution. It’s only when all attempts at this have failed and they’re willing to accept it as a misguided attempt to hide from their fear of uncertainty, and are willing to embrace that uncertainty, can they take the next step on the path towards professional trading.
The fact is that market analysis cannot predict the future. All future events cannot be known. And even if they could be known, then we still don’t know how these events will be perceived by the market participants and will therefore influence price.
A trader operates in an uncertain world. And all trading decisions are made without sufficient information, based on an assessment of the probabilities and a minimization of risk to protect your capital when you get it wrong.
Essentially, my daughter was correct – I ‘guess’ market direction.
The difference is that some traders guess market direction without any real plan or guidelines for formulating that decision, with an inadequate appreciation of both risk and opportunity and with an undisciplined, unprofessional and emotionally influenced execution of their trade. And their losses feed the account of those who guess market direction based on a documented, tested and proven plan which is designed to contain risk when they’re wrong and maximize opportunity when they’re right, combined with consistency in execution of their plan.
I guess market direction, but I do so within a framework provided by my business plan and an understanding of the probabilistic nature of the markets.
I had assumed I was at a stage where I was comfortable with who I was and what I did. It appears now that this assumption was false and I have more work to do on myself. It makes sense – personal growth shouldn’t be expected to ever end.
Why was my ego bruised at claims that I’m just a ‘guesser’? There are many possible reasons that I need to address in more detail:
- At a deep level I really want my daughters to be proud of me. Perhaps for a moment I suspected they weren’t?
- Maybe my own self-importance was inflating at too rapid a rate (finally reaching an overhead resistance for a great shorting opportunity)
- Maybe at some level I still have concerns that being a trader is a Way of life that adds limited value to society?
- Maybe I still have some doubts about my long-term survivability in this industry, and so feel that by ‘guessing’ I am gambling my family’s future?
Who knows? I’ve got more work to do in understanding this.
Your beliefs about what trading is and why you do it are fundamental to the success of your trading business. You cannot expect to operate in a consistently profitable manner if you have conflicting beliefs about the value of yourself, of your chosen career or of your ability to succeed at it.
So when your ego takes a little hit from someone’s comments about trading, take the time out to examine your own beliefs. It doesn’t matter what the comment is:
- Suggestions that it’s impossible to profit from the market.
- Claims that you’ll never be able to make it.
- Cutting comments about how those losses could really have been better used elsewhere.
If it produces an emotional response in you, take some time out to ask why? What does your emotional response mean in terms of your beliefs about yourself and your chosen career as a trader?
That self-examination may reveal the breakthrough you were seeking, to take you to the next stage of your career or personal development.
‘Chief Guessing Officer’
(* EDIT: In response to feedback…ok… I accept this dictionary is not the most authoritative source, but it was the first one at hand and will be sufficient for the purposes of this discussion)
In my opinion GUESSER word can be suitable for those who trades without Professional Skills.
I think ALL business in this words exactly similars to TRADING business & vice versa. means COMPANIES get ORDERS for lower cost and SELL for HIGH PRICE after manufactured or produced, in the same way we do in Trading Business (Buy at Lower rate sell at High price and vice versa ). ..
Then why the people call Trading Business is GAMBLING. If this is GAMBLING then ALL businesses are TOO… Isn’t Mentor?….
i feel fear when i go through this line….”Maybe I still have some doubts about my long-term survivability in this industry, and so feel that by ‘guessing’ I am gambling my FAMILY’S FUTURE?…
Final thing i would like to tell u that in personally is, i TOO have TWIN DAUGHTERS!… 2+ yrs Old…..
Thanking You with well wishes.
I agree Venugopal! It’s a business decision. Risk is accepted and managed. It’s different to just “guessing”.
Good luck with your 2 year olds. My daughters are now 15! It’s amazing how quickly time passes. Be sure to enjoy time with them now, or else it will be gone before you know it.
Yes it’s true…Thank you Lance…
This article is a nice little time capsule that memorializes a lovely moment in time. I’m willing to bet that you now have your answers regarding the career choices your kids ended up making. Did any change their views on trading? It seems like the opportunity of a lifetime.
Anyways, I would have felt the same way as you did back then, because becoming a profitable trader is very hard work, and only another trader can truly appreciate and understand the hard journey that this is. It’s not just as simple as picking up a valid strategy and just learning it, you have to master yourself too.
I do wonder though, does the doubt of long-term survivability ever truly subside?
Both are studying nursing. I don’t mind if they want to get into trading in the future, but I always said they should have another career first. So I’m especially pleased they chose something like nursing. It’s way more meaningful.
Nice article Lance!
Can you please shed more light on below sentence?
“Maybe at some level I still have concerns that being a trader is a Way of life that adds limited value to society?”
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Thanks for your kind comments. I’m really pleased you’re continuing to find value from my work here at YTC.
Regarding the value of a trader to society, there is a quick summary of my thoughts at the following page – https://yourtradingcoach.com/trader/does-trading-add-value-to-society/
Really deep and intense article… made me think about what we do in life, in general! Thank you for sharing!
Thanks Udhay, I appreciate the feedback. I’m pleased you got value from this article. Time spent reviewing our life plans will never be time wasted. Best of luck with your journey ahead, whether that involves trading or not.