BPA trading room Q&A: October 2, 2015
Can you talk about where the price action trader’s edge comes from, especially when institutions are very good at price action and can hire the best traders?
Audio duration: 4min 34sec
Do not worry about institutional trader’s edge
My thought is that’s irrelevant. If the market is going to move one way or the other and it’s doing so with enough force, it doesn’t matter if an institution enters two bars before you. For example, let’s say the institutions bought above 8, it does not matter if you buy on 15. You’re still going to make a good living, right?. Over here, it does not matter if an institution bought above here (24) or above 28. If you buy on 34, you’re going to make a good living.
Follow the price action—make your own money
So, I never worry about somebody being better than me, although I sincerely doubt that there are very many traders at the best institutions who know price action as well as I do. I know that sounds arrogant, but that’s the truth. But I never worry about somebody being better than me. I don’t worry about them having any advantage because if the market is going to have a swing, it doesn’t matter when I enter, I’m going to make money. If the market’s in a trading range and I start selling above bars or buying below bars and use an appropriate stop, a wide enough stop and scale in properly, it does not matter that some institutional trader is doing it better than I’m doing. As long as I’m doing something that makes sense mathematically, I’m confident that I’m going to do well. I don’t care if somebody else is better than me.
Just do your best—and be objective
If I’m a baseball player and I’m batting .300, do I really care that somebody else is batting .310? No; I’m making $20 million a year and I’m happy. If I’m averaging 25 points a game as a basketball player, they’re paying me $10 million a year, I don’t care that somebody else is making 27 points and $20 million, $25 million. All I care about is am I doing something well and am I doing it to the best of my abilities. Am I consistent and am I not letting my emotions get in the way?
I don’t worry about the best traders. Anybody can be a good trader if they understand what they’re doing and if they can remain objective. You can be a very emotional person, but when you’re trading it’s better not to be an emotional person. It’s better to be able to put that on the shelf and just try to be objective. And that’s part of the enjoyment for me, and I’m sure it’s part of the fun for everybody. Can you do it? You know you can do it for five minutes. I can be objective for five minutes. Can you be objective for six hours? And that’s part of the challenge and that, for me, is part of the enjoyment.
Inspired by others doing good stuff
It’s one of the reasons I play tennis; it’s one of the reasons I watch a lot of sports. I enjoy competition. I enjoy seeing people try really hard. I enjoy seeing people excel, people who have trained really hard to become very good. And to be honest, I don’t care what activity it is… even if it’s some activity that I have very limited interest in pursuing. If I see somebody doing it really well, it makes me happy to know that they’re doing it well.
Snowboarding… I’m not a snowboarder, but I watch a little of it when the Olympics are on. Even synchronized swimming, which I hope nobody is a synchronized swimmer here… I think it’s one of the dumbest things in the world, but I’ll even watch that for a few minutes and I’ll feel happy because I’m impressed by how well the people are doing it.
To me, I enjoy doing things well. I enjoy training hard. I enjoy big projects, like creating the videos. It’s a huge project. I’m really getting burnt out on creating all the slides, but at the same time it’s personally satisfying. I enjoy doing something good. I enjoy spending my time doing something good, and I enjoy trading for that reason as well. It makes me feel good to see that I can do something really well and do it for hour after hour after hour. It’s fun.
Do your own thing—be consistent and good
So I don’t worry about the institutions being better than me. I don’t care if the top trader at Goldman Sachs makes five times more than I make. I don’t care. I don’t care if a hedge fund trader makes a lot more money than I make. I don’t care. All I care about is am I doing something that’s rational, logical? Am I being consistent? When I do something stupid, am I fixing my mistakes immediately and not getting upset about the loss? That’s all I care about. And I just know… I just trust that, over time, it works. Even over time, I mean over the course of a day, I’ll come out okay. So, even if I make a mistake or two during the day, I’m still confident that I’ll end up ahead. To me, the goal is to be consistent and good. It’s nice to be great, but you don’t have to be great to do very well at this.