RSS
European Debt: An Elliott Wave Perspective

Key To Trading Success: Ignore Nature’s Laws?

March 25, 2009 at 11:00 pm | Trade Artist | Comments 0
Print This Post

March 25, 2009

The following is excerpted from Robert Prechter’s Independent Investor eBook. The 75-page eBook is a compilation of some of the New York Times bestselling author’s writings that challenge conventional financial market assumptions. Visit Elliott Wave International to download the eBook, free.

By Robert Prechter, CMT

…The natural tendency of people to apply physics to finance explains why successful traders are so rare and why they are so immensely rewarded for their skills. There is no such thing as a “born trader” because people are born — or learn very early — to respect the laws of physics. This respect is so strong that they apply these laws even in inappropriate situations. Most people who follow the market closely act as if the market is a physical force aimed at their heads. Buying during rallies and selling during declines is akin to ducking when a rock is hurtling toward you.

Successful traders learn to do something that almost no one else can do. They sell near the emotional extreme of a rally and buy near the emotional extreme of a decline. The mental discipline that a successful trader shows in buying low and selling high is akin to that of a person who sees a rock thrown at his head and refuses to duck. He thinks, I’m betting that the rock will veer away at the last moment, of its own accord. In this endeavor, he must ignore the laws of physics to which his mind naturally defaults. In the physical world, this would be insane behavior; in finance, it makes him rich.

Unfortunately, sometimes the rock does not veer. It hits the trader in the head. All he has to rely upon is percentages. He knows from long study that most of the time, the rock coming at him will veer away, but he also must take the consequences when it doesn’t. The emotional fortitude required to stand in the way of a hurtling stone when you might get hurt is immense, and few people possess it. It is, of course, a great paradox that people who can’t perform this feat get hurt over and over in financial markets and endure a serious stoning, sometimes to death. Many great truths about life are paradoxical, and so is this one.

For more information, download Robert Prechter’s free Independent Investor eBook. The 75-page resource teaches investors to think independently by challenging conventional financial market assumptions.

Robert Prechter, Certified Market Technician, is the founder and CEO of Elliott Wave International author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.

Filed Under: Economy

Tags: •

RSSComments (0)

Trackback URL

Leave a Reply

If you want a picture to show with your comment, go get a Gravatar.

Subscribe without commenting

Disclaimer and Waiver of Claims: Trade Artist is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. The analysts and employees or affiliates of Trade Artist may hold positions in the stocks or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities. Trade Artist, the authors, the publisher, and all affiliates of Trade Artist assume no responsibility or liability for your trading and investment results. Factual statements on the Trade Artist website, or in its publications, are made as of the date stated and are subject to change without notice.

Past results of any individual trader or trading system published by Trade Artist are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Trade Artist’s products (collectively, the “Information”) are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented on the Trade Artist website are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment. Securities and options involve risk and are not suitable for all investors.

See the characteristics and risks of standardized options.

Promotion and Endorsement Disclosure: In an effort to better serve readers of this blog, Trade Artist frequently requests and receives complimentary review copies of the courses, products, or services that you find on the Trade Artist website. That they are complimentary does not affect our review of the product - Trade Artist will always provide you with a direct assessment of a course, product or service that we review. In return for that endorsement and only in the case where you purchase directly though affiliate links on the Trade Artist website, we may be compensated by the producers of those products.