E-Mini Trading Systems and the Search for the Holy Grail
In several recent articles I have been discussing some of the phases that new traders enter and exit in their Torque trading system careers. Each phase is a stopping point, or at least point where traders pause to rectify their trading styles, and then move on to another stage. The goal, of course, is to become a consistent and profitable trader. The final stage that I generally encounter with unsuccessful e-mini traders is a stage where they are on an eternal search for that one system that will make them the trader they want to become. I should also add, that the eternal search stage is usually a terminal stage in a trader's career. I know many traders who are in this stage will not greet this article with warm smiles and a happy demeanor, but the truth is the truth.
Very quickly, we initially discussed the initial stage a new trader enters; where everything is brand-new and the realization that money can be lost is shocking. Following this new trader stage is a fear based stage where traders are hesitant and reluctant to let their profits run and enter normal setups. Quite simply, they are worried about losing money, not making money. A good many e-mini traders emerge from fear-based trading to successful trading; and a sizable number of traders end their career at the fear-based stage. This group finds trading very stressful, more stressful than they care to endure.
In my worldview, the most unpleasant and torturous state of trading is the trader who has purchased numerous systems with little or no success. This trader has purchased indicators, bought books, and joined trading rooms. For this trader, success has been elusive because he or she has missed the point. There are those that would have you believe that e-mini trading, especially in the scalping style, relies on predictive indicators. They believe that there ought to be a standardized formula that spits out surefire trades when the stars are all aligned in a perfect constellation. Scalp trading is normally a reactive (not predictive) type of trading where the market dictates the variables and a good trader takes what the market offers. Scalping is seldom predictive, and almost always reactive. It's a very tough concept for many traders to assimilate.
The problem is a simple one; indicators, trading systems, and even trading rooms are all tools for the trader to learn how to trade. The key phrase in the previous sentence is "learn how to trade." I recently received a letter from a prospective client who thought that my trading style was similar to "shooting from the hip." He had been through several e-mini trading courses and was a break even trader, at best. What he did not realize, or hasn't learned yet, is that the vast majority of price action occurs in and around support and resistance. Indicators do not point out support and resistance effectively, they simply report past data; as a matter of fact most are simply convoluted reproductions of the past period of price action. I use indicators to confirm decisions that are made in and around support and resistance, but my primary tool in learning to trade is price action, price is everything.
But returning to our stage III fellows, though searching for the Holy Grail of trading, I often speak with them regarding potential for correcting their trading with my trading style. I generally hear a litany of complaints about training educators who they felt took advantage of them, didn't know what they were doing, or were incompetent. There are some e-mini trading educators that fall into these categories, but by and large if a new trader takes the time to learn a good system he or she will find success. On the other hand, the searcher for the Holy Grail continues his eternal quest hoping to find the trading version of the fountain of youth. No amount of encouragement seems to cheer these folks up, they want success and they want it now because they have been deprived of their rightful profits for a long period of time.
Advising traders in the Holy Grail stage is difficult and tiresome. Generally speaking, I encourage these traders to find another line of work as they have given it their all and trading hasn't been a career for which they are suited. There is no Holy Grail. There is hard work, there is an infinite amount of effort in learning charts and trading methodology, and there is experience. Again, I repeat, there is no Holy Grail; there are no magic indicators or trading systems that can replace trading technique for personalities that may be unsuitable for the trading business. Experience has taught me that the Holy Grail candidate is one step from leaving the business and the best advice I can give is to find a career for which they are better suited. Many of these people are very talented, very intelligent, and good people; they just aren't traders, and there is nothing wrong with staying out of the trading profession.