You will never become a market expert, but that’s okay, many people believe that in order to make money in the markets, you need to become a market expert. But markets are so complex, with so many factors at play at any given point in time. No one can keep track of all the information and trade successfully. No one can be a market expert.
That's why when you ask any experienced businessman who has been in the industry for a long time, he will tell you that he is a student of the market. Every day the market teaches us something new. Therefore, it does not matter whether you are a market expert or not. Instead, we focus on two things we can control:
1. Find a system with a good win rate.
2. Manage risks. Let's talk briefly about these two points.
There are many ways to make money in the market. Technical analysis offers a wide range of tools to choose from. Some may choose a moving average based trading system. Others may look for Fibonacci-based systems. Traders should try all the different options to find the system that works best for them. Extensive backtesting of the system is also required to find out its effectiveness.
But remember something – the win percentages that a backtest may bring will not tell you when those win rates will occur. That would be completely random. For example, let's say you find a good system with a 60% success rate. This means that for every 100 trades you make; 60 trades will be profitable and 40 trades will be losing. But the system doesn't tell you which trades are going to be winning trades.
So, to take an extreme example - a trader might have 40 losing trades in a row and then 60 winning trades in a row. In this case, after 40 consecutive losing trades, does this person still have capital left to trade? The random nature of winning makes it even more important for every newbie to focus on better managing risk. Instead of trying to be an expert on the markets, become an expert on risk management. Therefore, the number of trades (position size) and the amount of exposure (risk management) need to be determined. You must understand the importance of position sizing and risk management, otherwise you will not be able to continue trading.
No matter how smart you are, the market will teach you the importance of humility. The market doesn't care how smart you are. It doesn't care what you achieve. It doesn't even care about your last 10 winning trades. Every transaction is a new beginning and must be approached with a fresh mindset. There are so many factors involved in trading. At any given point in time, any of these factors could work against you and result in your trading losses. Failure is very real and needs to be accepted.
Trading is like your closest friend. It will reveal all the deep-seated flaws in our characters. Occasionally we lose our confidence. This will make us doubt our abilities. But every time, it also provides us with the opportunity to build our own good character. Every lesson we learn in the markets is designed to become a better trader and a better person. Therefore, one needs to accept failure with an open mind and constantly strive to improve oneself.