Is Trading Hard or Easy?

Trading can be hard and easy - which one is it for you? In this video Stuart McPhee explains specific situations where we are required to be counter intuitive. He was running with one of his friends once and he asked him about trading if it is hard or easy. This is a fantastic question. He is trying to respond in very basic terms. Often, the steps along trading success are not obvious and often the majority of actions and decisions are counter intuitive. Trading really is counter intuitive. He applies this idea to more specific situations.

Probably the most common is the idea of being in a losing trade. You open a trade, it moves against you and you face with a loss. It is intuitive to remain into the trade in the hope to get back and do not lose your money. But is counter intuitive to close that trade and completely deny yourselves the opportunity of breaking the trade. When you face with a profitable trade it is intuitive to close that trade quickly to realise the profit, but it is counter intuitive to take that extra risk, hold on into the trade and allow that profit to run. When you face with a losing situation it is intuitive to play more money into the next trades in hope of getting that money back. It is counter intuitive to follow that risk management rules.

It is intuitive to buy cheap. So when you are looking at stocks it is intuitive to buy stocks that are cheap and getting cheaper. It is counter intuitive to buy things that are highly priced. Stuart McPhee, using his conservative approach, looks always to buy stocks that are highly priced hoping that they would go higher. When you first start trading it is intuitive to think that the first decision you make is the most important. It is counter intuitive to think that your last decision, the one to get out of the trade, is the most important. Stuart thinks that when you all start trading you think trading is easy money, and Stuart thought so at the beginning.

But then you realise that it is not quite easy. And after you start losing money you see that is more difficult and you adopt a more complex approach. So now people avoid simple systems and adopt a complicated methodology. So when you start it is intuitive to think that a complex approach is going to work better. Stuart McPhee says that it is also counter intuitive to realise that keeping it simple often works best. These are some comparisons between intuitive and counter intuitive. Going back to the first question, you can see that there are simple concepts. So when you look at them you may think that trading is easy. But when it comes of following and applying this principles and following the rules, that is where it gets more difficult.

Submitted by YouTube Trader on Fri, 04/09/2010 - 21:32

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