Is The Market Your Friend Or Foe?

Einstein once said one of the most important questions we can ask ourselves is "Is the universe a friendly place". I think as traders we should ask ourselves, is the market a friendly place? That may seem like a silly question but I think it's a question that most of us need to answer.

I used to know a trader who had great trading ideas, great analysis of the market yet he didn't make any money trading. He would tell his ideas to other traders and they would make money based on his insight yet he would lose money or make very little. I always wondered why he struggled yet others did quite well taking trades based on his recommendations.

I finally realized the reason this trader was losing money was not because of his faulty market analysis but because of his faulty thinking. This trader always assumed his winning positions would turn into losers and that his small losses would turn into larger losses. As a result of this kind of thinking, this trader would exit his winning positions once he had a small profit and would exit his losing positions as soon as they showed a small loss. He never allowed his trades to develop so all he would end up with were many small losses and small wins. His view of the market was that the market will find a way to take his money so he micro managed his positions which caused him to exit his trades too soon. It's almost as if this trader was looking for excuses to exit his postions early.

Once this trader changed his thinking, he began to notice his P/L grow and become profitable. The methods he was using were still the same but it was his new way of thinking that made all the difference. His view about the market changed from thinking the market is out to take his money to thinking the market is there to help him accumulate money if he follows his winning methodology.

Who is this trader I am talking about? That trader was me! Years ago I couldn't figure out why I wasn't making money even though my forecasts were correct a high percentage of the time. I finally realized I viewed the market as a foe and not a friend. Once I changed my thinking about the market, my trading greatly improved.

I'd like to add one other thing. Just because you may view the market as a friend does not mean you will make money. You still need to have a method that provides an edge and has some degree of forecasting ability. On the other hand, if you do have a profitable approach towards trading but deep down inside you view the market as an enemy, you're probably going to be spinning your wheels for quite awhile.

Is the Market your friend or Foe? Silly question? I think not!