Everyone gets what they want from the markets

Dollar Index, The Opening Print, Trading Psychology

Lately I’ve been getting a lot more calls and emails from people interested in joining the MrTopStep Trading Room and trading alongside our collective of working professional traders. Most of the people are interested in our concept of collective intelligence and the opportunity to hear people calling out their trades as they make them. A lot of them are also still working through the fear that the credit crisis put into virtually everyone involved in the markets.

Fear gives us the drama we want

Along with those calls have been a few from people who are so focused on their fears, they wanted to convince me to be afraid along with them. They mainly wanted to tell me that it’s impossible to make money trading. The only people who make money are the market makers, one told me, because they can push the market in whatever direction they want. Deep down, they wanted me to talk them out of their fears, but the deeper question is, what purpose was the fear serving for them? They needed it for some inner drama that they were still working through.

Above all, if they could make me fail to talk them out of their fear, they could reinforce their own excuse for not trying, for giving up hope that things will ever get better for them. Trading won’t make it better; they’ll find a way to pull failure from the jaws of success no matter what.

Among the other things I heard: It’s impossible to time your trades because you can never get filled. You’ll always get chopped up even though you’re right. The system is rigged by the big players and retail traders don’t have a chance. Everybody claims they make money but nobody has ever shown that they actually do. Nobody. Apparently every investor is either cheating or delusional.

No matter how much I tried to say, you have a point, timing is difficult but it is possible, or said, you can come into the Trading Room and follow the trades yourself on a chart — don’t take my word for it, those disbelievers had an answer. You’ll just tell us about the winners, not the losers. You won’t tell us how you do it because if others succeed then you won’t. Talk about belief in a zero-sum life.

If I suggested using options to control risk, the answer was simply, “I don’t know anything about them.” Would he like to learn? We could teach him. No, because by the time he learned, he’d have lost all his money. Never mind that your broker can give you a demo account to practice with and you should use a demo, not real money, to perfect your trading method. That’s why surgeons learn anatomy on cadavers first.

The stock market is Americans’ #1 fear

I understand that a lot of people got burned during the credit crisis. For decades Gallup has done a national survey asking Americans what their biggest fear is. You might guess that it’s death. But death was actually No. 2, year after year. The No. 1 fear was public speaking. Which led to Jerry Seinfeld’s famous joke: That means if you’re at a funeral, you’re better off in the casket than delivering the eulogy.

Since 2009, public speaking and death have dropped to Nos. 2 and 3. The new No. 1? Getting into the stock market. It’s scary and we know it’s scary. But that doesn’t mean we need to be ruled by fear.

Profit or (expensive) drama: we all get what we want

Market Wizard and legendary fund manager Ed Seykota once said, “Everybody gets what they want from the markets.” Ed is a philosopher of trading psychology. What he meant is that those who want profit get profit. Those who think they want profit, but really want something else, get that something else.

What is that something else? The drama. The adrenaline rush. Something to brag about at cocktail parties. A chance to prove you’re not a failure. And even a chance to prove that your cynicism was right all along. The system really is rigged. You really can’t succeed. So you’re better off not even trying.

I finally had to gently suggest to one guy that maybe he shouldn’t be trading. It’s not for everyone. You have to face your fears directly and they are often not the fears you expect. You have to be a warrior.

Last week I suggested shorting the dollar index. Three days later, that short would have profited you $700 a contract. But if you had held on, you’d be back to zero or losing money, because the bounce happened right where it was supposed to happen. It was a test of a trader’s ability to act when the opportunity presents itself and then to get out without greed when the opportunity is over.

If you wanted money, you would have gotten $700. If you wanted drama, you would have gotten that instead. But $700 is a lot to pay for a bit of drama.

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Vikram Rangala (68 Posts)

Vikram is a futures and options trader with 16 years of experience. He previously taught for the University of Florida's Warrington College of Business and Honors Program. He is a regular participant in the MrTopStep IM-Pro Trading Room.

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