Real Life Trading vs Popular Myths: This video (and article) will focus on the discussion of popular trading myths most people believe in, and the right practices people should divert themselves into.

If you’re one of the many people who believe in these myths and not focus on real life trading, then this content is for you! Apply the practices being discussed and surely your trading performance will soar greater heights. 

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Real Life Trading vs Popular Myths

Hey my friend, welcome to this edition of the top dog trading video. Today, we’re going to talk about real life trading and what expectations you should have because it’s very important. It’s very important that you have realistic expectations, otherwise, well you’re doomed to be losing in your trading. I want you to be a profitable trader, so, the first thing we have to do is step one, set up realistic expectations, and one of the expectations that I find that people are unrealistic about is they think they should be able to find some way to catch every swing high and low. So they’ll say how would I have known to go short or long there?

That is ridiculous. You will never know how to find, in advance, every move in the Market, every swing high and low. It doesn’t happen, nobody can do it. I can’t do it. You can’t do it. Warren Buffett can’t do it. Well, God can do it, but God’s not telling anyone how to do it. So if you think you can do that, then I want you to say hi to the Easter bunny and the tooth fairy and Santa Claus for me because that’s the planet you live on. They all live on that planet. Alright, all teasing aside, what real trading comes down to in real life is about finding probability situations which, by the way, is not even close to finding every single move in the market.

Trading in real life

And one of the side effects of this almost disease where people come uncomfortable with trading is fear of missing out. They think if the market makes a big move and they didn’t catch it, then you know, they’d say, I should’ve been able to catch that. Then they’ll go back and they’ll try to review the situation and try to figure out how could I have known that this was the low and that I should have bought that puppy? And the trouble with that is that we can become very good at figuring out ways using our imagination to note some patterns there and say okay, this is how you could have known except for one problem. That might have been the situation on that particular move. But that has nothing to do with every move in the future. So in trading, there are no certainties.

That’s one of the problems. That’s one of the psychological challenges in trading is that human beings, myself included, I love certainty, and most of us do. We’re actually wired for certainty for security. It’s part of our survival instinct. Nothing wrong with that actually, it’s a good thing. But when it comes to trading, and again this is what makes trading somewhat unnatural and therefore difficult, is that there is no certainty, there are only probabilities. Even when we do have a high probability scenario, they don’t all work out well, otherwise, by definition, we would have certainty. That’s why risk management and Money management come into play is so that during those times when the probability doesn’t work out, let’s say you’ve got a 60 percent probability, over a large sample of data, that’s going to work out for you. But 40 percent of the time, it’s not.

What is it like to be a trader

Therefore, you’ve got to have impeccable risk management and money management because those two things are what real traders live and die by. Amateurs tend to look for the magic indicator, price pattern or some geometry pattern. Those things can be fine, but they’re not magical – they’re mathematical. So the fact that their mathematical equations are exactly what can allow them to help us have probability scenarios as long as in our minds, we recognize that’s all it is and it’s going to occur over a large sample of data. To bring that even more into reality, you’ve got to understand that all kinds of stuff happen in the market. So even if you recognize a pattern that maybe works six, seven, eight times out of 10, based on history – a lot of people are into backtesting. But hindsight’s 20-20 and that’s still what that is, backtesting is still hindsight.

So when I come into the future, you get that same pattern, whether it’s a price and indicator pattern, Fibonacci levels, etc., what’s gonna happen this time? In other words, what the past does not tell me is, well, is there going to be gossip that comes across the wires at the time I take that pattern, is there gonna be some news or rumors, doesn’t even have to be real news, right? It could be fake news! It could just be some rumor that comes across the wires that aren’t even true, but it will affect the market at the moment you take the trade. And there’s no indicator that’s going to tell you that the rumor is going to happen five minutes from now, so we definitely want to look at the prescheduled news, but even with that, how’s the market going to respond to that news?

What do day traders do

Number one, you don’t know what the news is going to actually be and sometimes, ironically, the market will move up on bad news and are moved down when the news is good, it’s just not good enough or it’s really good, but expectations were really high. And you look at the expectations numbers and sometimes those are matched or even exceeded and the market still moves down. It’s very unpredictable. You can put the odds on your side, but again, that’s why you must absolutely master money management and risk management. Here’s another little tip for you. We’ve looked at these highs and lows here. So I got a lot of people who say, you know, indicators are all lagging and price action is the only thing that is predictive.

Everything’s lagging. For example, if we take the hard-right edge of the screen right here, we’ve got a very nice, I mean that’s just a common engulfing pattern and you know, very obvious one. A lot of people would notice that, see that, and, therefore say, that looks like a very high probability cycle high or swing high, so I’m going to short that. So you short it and the market goes down a smidge and then it goes up and takes that high out. So why didn’t that candlestick pattern work? Who knows? Candlestick patterns are short-term patterns. Here’s the point: Candlestick patterns or short-term patterns, that’s number one, they do not determine a trend, which is by definition always long-term; number two, they don’t always work.

Trading for a living

Even Steve Nissen, who brought them to the west, and I love Steve. I do use candlesticks and I’m not dissing them at all. I liked them very much, but they’re only one piece of the puzzle. In other words, they’re one part of the business plan and they can not be used in isolation. They must be taken in the context of the entire chart and I agree with that 1 billion percent. So that is very important. That’s the reality of trading. So how do we trade? The ultimate answer is obviously not gonna be able to give you all the answers here so that you know a 10-minute video where you can go work for Goldman Sachs and become a master trader, little unrealistic, but it all comes down to this. It all comes down to the supply and demand.

Not only supply and demand in the sense of the bids and the asks and what the sentiment is, because bids and asks, sentiments, potential supply and demand, those are things that are just like talk, right? And well, you know, talk is cheap. Actions speak louder than words, and the same is true in trading. So what are actions in trading? Actions are the actual buying and selling, the commitment of money.

Traders daily routine

At the moment, you’re taking the trade not 10 years ago or 20 years ago, even three weeks ago from backtesting. So the way real trading works is we look at the moment we’re taking the trade, the pressure of buying and selling, price action, volume, mathematical functions such as indicator, they can be part of that as long as you really understand what they’re measuring. And look to use ones that are measuring the balance of power as it’s sometimes called at that time realizing that that can change in a minute.

And that’s where we take our trade based on that. There’s an imbalance here of actual commitment of money because when people send their money out into the world, they’re serious. People are very serious about their money. The bids and the asks, those can be removed at any time, but once their money is gone, that means they’ve really made a commitment. Then, understand, things still can change because there’s no certainty, but that’s the world of trading. That’s the real world. And you’ve got to learn to deal with that. So you put your trailing stops, of course, you position size correctly and all of that sort of stuff so that then what happens, you’re good with it because you know, based on your testing over a large sample of data, you’re going to be good.

Wrapping things up!

You’re going to be golden. And use money management so that you can withstand the drawdowns as long as your system is tested for longterm profitability. So that’s it for today. If you liked this video ‘Real Life Trading vs Popular Myths’, if you felt it as valuable, if it helped to bring some reality to trading, or you think someone else needs to learn some of these realities, please go ahead and share the video. That’s one of the best things that you can do, of course, is pay things forward.

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