AS YOU TRADE - a series of extracts from the book "As You Trade"


AusDoc

Well-Known Member
As You Trade
An original and insightful journey into the world of markets and trading.
Copyright 2003 by Clifford Bennett. But authorised for re-distribution by any person in receipt of this series with full text here including attribution to the Author.
Noble Pursuit

The pursuit of trading for profit, sometimes referred to as investment, has been a major driver of creating the high levels of liquidity that currently exist in markets today.

This heightened liquidity generates improved efficiencies in the flow of capital, via bond, equity, and currency markets, to productive purposes. Speculation, or to use the more politically correct term, investment, has reduced the cost of doing business, and encouraged and assisted the expansion of the global economy.

Getting markets right is about finding the variance between the reality of the current, and likely future, fundamental economic situation, versus the broad market perception, the consensus, of what that reality may be.

Is there a variance between reality and perception regarding a particular market? If so, at some point the market will have to play catch up, and that period of adjustment is likely to provide enormous profit opportunity for the speculator aware of this variance early in the game.

Sometimes the reality and consensus of a particular fundamental backdrop are aligned, the consensus is correct.

More often than not they are at odds. It is then only a matter of time before reality and consensus are forced to converge. In most circumstances due to the energy of the catch up phase, the market may dramatically overshoot. This is the basis of all the large and sharp adjustments markets experience from time to time.

The interesting thing is that when the consensus is correct, there is not a lot of money to be made, as the reality was already priced into the market. it is when the consensus is offline that significant opportunity presents itself.

How is it though, that given the high degree of communication and advanced analysis of economics and markets, that the consensus is frequently, let’s face it, wrong? Understanding why the consensus frequently fails, will free us from its influence, allowing a more pure and objective focus on major opportunities presented by this very failing of contemporary market economics.

The source of untold wealth in market trading,
lay in the discovery of the consensus-reality gap.

Success in trading is not just about markets and their direction. that is half the story. Success in trading today, like any other modern business, is really about your individual style of interface with the market.

It is entirely possible there is only one right answer for you, and no one else can tell you what it is. it is the approach that suits you, fits you perfectly. This is the only approach you will enjoy, be able to stick to, profit from, and feel fulfilled by. Find the right approach, your own unique swing as some might call it, and you are assured of creating an exceptional level of wealth. Easy to say, but how to go about it entails quite a journey.

There is no “one” way to make money in the markets.
There are actually about “six billion” ways to do so,
the number of people on the planet.

To achieve sustained profits and generate significant wealth, it is important to find "your way”. There are broad groupings of approaches and style as to how to profit from markets, but there is only one way for each of us. Given the odds are stacked against accumulating tremendous wealth, it is extremely important to seek out one’s own perfect way for oneself. This is the key to limitless wealth.

Imagine six billion ways,
and only one is perfect for you,
and that is all you need.

If you apply a style of trading that is in harmony with your own personality and objectives, success will abound. Everyone is good at what it is they love doing. Find your unique swing in any endeavour and you have found your purpose, your love. It follows that if you pursue the discovery of trading markets in a way that is comfortable and natural to you, then you will be readily able to apply yourself in a consistent and winning fashion. it is a lack of consistency that brings many a great trader undone.

Some psychological theorists suggest that everyone involved in markets is successful in that they are getting what they really want. Some may want pain, and get it. A few want financial success and get it. What the vast majority appear to desire is to be able to have “conversation” that will impress their colleagues, relatives and friends. “To be seen to be a participant” would seem to be all most people really want. This explains why the vast majority do not assimilate vast fortunes, why the herd will make or lose money relatively comfortably.

We should all consider what it is we really want from markets. then achieve our purpose.

Clifford Bennett


The next part of this series will continue tomorrow with the start of the “warrior trading” section.
 

jack

Administrator
Staff member
The interesting thing is that when the consensus is correct, there is not a lot of money to be made, as the reality was already priced into the market. it is when the consensus is offline that significant opportunity presents itself.
Sorta reflects one of my firm beliefs of the market: The market must, at any given time, do what would screw over the majority of participants in a given security.. for this is what it does, it feeds on 'normal' (behavior), and 'normal' doesn't work in the market.

Put another way, if 80%+ of the people believe price is going up and have positioned themselves long, who's really left to buy it up further?
 

sqa

Village Scribe
Jack said:
Sorta reflects one of my firm beliefs of the market: The market must, at any given time, do what would screw over the majority of participants in a given security.. for this is what it does, it feeds on 'normal' (behavior), and 'normal' doesn't work in the market.

Put another way, if 80%+ of the people believe price is going up and have positioned themselves long, who's really left to buy it up further?
In a competition for livelihood, why would you "trust" everyone else trying to make out better than you? ;)
 

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