The First Step

I've convinced myself of the following: Every trader begins with, and is subsequently defined by, his or her edge. Sounds like some hackneyed cliche, right? Not surprising. No other word in this game gets thrown around, glossed over, or assumed a priori like the term "edge". It's the four-letter word of the business; yet unlike expletives of a scatalogical nature, uttering the word repeatedly at a genteel thousand-dollar-a-head seminar, or reading the word in every other paragraph of every other magazine and online article on trader psychology won't raise any eyebrows. Instead, it's the explicit details, the functional guts behind that inscrutable word which are to remain hush-hush and behind closed doors.

An entire industry of self-help books and seminars for traders is built upon this mystery remaining a mystery. With sleight-of-word misdirection those selling a dream will have the buyer lay blame where any struggling trader would promptly assume it would be: in the mind. After all, the "tools of the trade" are all readily available from any standard quotes provider and data backtester; with such an arsenal of market thermometers at hand, the failure to consistently profit must come from some inner place, right? How else could that MACD convergence-divergence cross confirmed with trebly-smoothed and doubly-offset stochastics fail to generate millions by now? Deftly swapping one apparent enigma for another more readily dissected, the "can't do, so teach" crowd behind the word processors have diverted their readers from figuring out the markets into figuring out their own heads.

Now when it comes to making progress as a trader, I'm not knocking mental introspection at all, far from it. What I do take issue with is the assumption that once those psychological problems are "settled", success in the markets should soon follow. I believe instances where psychological stumbling blocks prove to be the main obstacles that prevent one from achieving his trading goals are actually very rare, and almost never true of those who have yet to achieve any level of consistent profitability. For the great majority of rational beings attempting to make a living from the markets, it's the lack of any real edge to begin with which gives rise to those mental issues that may serve as temporary scapegoats but can only conceal the truth for so long. No amount of positive visualization, group empathy, inner "focusing", or even plain willpower can help the trader lacking a defined and applicable edge. Futhermore, these techniques can even serve to mislead and retard any real progress by postponing that crucial first step most struggling traders probably need to admit to and accept of themselves: that they have not yet found an edge at all. Trying to remedy the symptoms before perceiving or conceding to the cause of illness can only result in prolonged frustration.