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Friday, June 19, 2009

Can I Make a Living As a Mechanical Trader?

The short answer is: no, you cannot make a living as a mechanical trader. In fact, you cannot make a living as any kind of trader, mechanical or otherwise. This doesn't mean that you are a bad person or stupid or somehow lack the qualities needed to be a success in life. It is simply a realistic appraisal of the statistics of success regarding the trading profession. Thousands and possibly millions of people around the world have all decided one time or another to try their hand trading profession as a way of life.

They have done what you have done, which is to list their strengths and weaknesses, have some kind of market feedback to suggest to them that they could actually do this for a living, developed a plan and put it into action. They may have received the encouragement of friends and the advice of professionals. They may have equipped themselves with the finest hardware and software available to give them an edge. They may have sufficiently capitalized their effort so that they can participate in markets for extended periods of time. They researched systems that are appropriate for their personality and the kind of markets they propose to trade. They have written business plans, rehearsed their trading strategy through simulations and prototyping with real money small position sizes.

They may have aligned themselves with a tribe of like-minded people for mutual support and multiple perspectives. They may have equipped themselves with market insights from recognize longevity and above-average results. They have done all of these things, and like you they have failed. These people were not stupid, naïve, or unprofessional. They are all generally good and decent people just trying to make a living. It's just that the market is hard and unforgiving. It will crush you without blinking an eye.

The guy on the other side of the trade take your money without blinking an eye no matter how unfair you feel it isor how professional you are. He is trying to feed his family just like you were. But you failed and he didn't. The reason they succeeded and you fail, you ask? If you fail to perform any of the good ideas earlier in this article the answer is easy. You were a naïve child unprepared for the world.

But if you were well-prepared as noted above and still feel, the answer is harder to find, and sometimes we can't find it at all. The market is not only stranger than we know, it's probably stranger than we can know. And just when you think you have it figured out after a long winning streak, and have taken on more risk than you realize because you're hot, the new kid in town who was luckier or faster than you will take all your money and leave you crying in the street. But maybe you are different.

Your plan is better. You are smarter. You are faster. Keep telling yourself that. All I know is that everyone I have met who makes a living as a trader has a ruthless commitment to performance and preparation and specialization in their niche. They are driven to succeed by an inner fire that cannot be extinguished. They are relentless about exploiting their edge every time they see the opportunity and they do not quit until they have the prize in hand. and then they guard it as if their life depends on it. That is who you are trading against.

Do yourself a favor and find an easier way to make a living. Take care of your long-term investment through passive asset allocation. But if you must trade, prepare yourself well and remember that you have been told. Your results are entirely your responsibility.

Don't ever forget that.

Now go trade.

[expert=Ken_Long]

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