The Market Will Deceive You If You Let It

The cold, hard truth about trading the financial markets is that the things you’re led to believe are important are often not as important as you think. Typically, the most important parts of trading are rarely discussed in-depth and seem to just get “blended” into the background of the conversation.

The Market Will Deceive You If You Let It

Remember, this is an industry where, on a good year, 5 to 10% of those who attempt to trade with real money will actually make money at year’s end. Professional traders are the ones making most of that money, and they are your competition. Hence, they are not going to go out of their way to make sure everyone knows the reality of trading and the most important skills and issues to focus on to further your trading career.

The reality of trading the markets is that almost everything about it is deceptive and counter-intuitive or contrarian in some way. I liken trading to the greatest chess match ever invented. You’re competing against every other trader, including yourself, which can be the toughest opponent of them all.

In this lesson, I’ll talk about some of the most deceptive parts of trading. Most retail traders don’t find out about these things until it’s too late, after they’ve already lost a lot of money and left the business for good, broken both mentally and financially.

How I can help you avoid being deceived by the market?

The issues discussed below are things you are not going to really be thinking about when you first start trading. They are normally discovered a year or two into real-money trading, after most people have already lost more money than they care to acknowledge.

So, in today’s lesson, I’m just speeding up your learning by a few years by filling in the blanks and giving you some missing puzzle pieces you may not even know you’re missing yet. I want to warn you about these problems and teach you how to solve them so that they don’t end your trading career.

My own experiences from over 18 years of real-money trading in global financial markets have taught me many lessons. I don’t have all the answers, and there certainly is no silver bullet to trading success. However, I have gained some very powerful insights over my trading career, and as a beginning trader, one of the most important things to be aware of and conquer is the deceiving nature of trading and the industry surrounding it.

The following points are some of the most deceiving aspects of trading combined with some solutions to help you not fall prey to them, hence speeding up your trading journey…

It’s easy to enter, hard to exit.

Many traders, not only beginners either, have a tendency to over-focus on trade entries and trying to find some ‘magic’ trading system or mechanical trading software that will just allow them to print money on autopilot. This isn’t all your fault either. The trading industry definitely pushes trade entries and ‘systems’ over trade exits (because that is what sells and gets people to trade), money management and psychology, which are the more important aspects of trading. The fact is, it’s much harder to exit a trade properly than it is to enter, so that is what the majority of your attention should be focused on.

Keep in mind that when I say “trade exit,” I am referring to everything surrounding a trade exit. The stop loss, position size, risk reward, support and resistance levels, the average true range, etc. There are many factors one must consider when planning trade exits, yet for most traders it seems to be an afterthought.

How to not get deceived by this

One of the reasons traders are so easily deceived by this entry / exit issue is that all that is really discussed and sold online and elsewhere, are trade entry systems that simply don’t stress the importance of the exit.

As I pointed out in my article, “A Case Study of Random Entry and Risk Reward,” with proper money management and risk reward (trade exits), a trader can actually make money even with a totally random entry system. Now, that doesn’t mean the entry isn’t important, because you can combine a high-probability entry method with proper trade exits to improve your trading performance far beyond just a random entry method. The point is, the exit system is much more important than the entry system you use. So, just keep this in mind as you are out there surfing the web and reading tons of different trading blogs. I have multiple sections of my advanced trading course dedicated to the topics of money management, risk reward, and trade exits.

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Hopefully, after reading this, you will start to think just as much, if not more, about the trade’s exit than its entry, because the money is made or lost on the trade exit, not the entry, contrary to popular opinion.
It’s easy to fund an account, hard to build it, and even harder to withdraw profits.

The trading industry, e.g., brokers, make it easy to fund a trading account, yet they put very little emphasis on how to actually make money and that you should be withdrawing some of your profits on a regular basis. You have to remember that no one actually cares about you making money as a trader except you and me.

Your goal as a trader is always to make money in order to withdraw money so that you can actually use it (or save it). The point of trading isn’t just to keep churning and losing and lining your broker’s pockets. You will hear about the upside and the potential money to be made when you go to a broker’s website, but rarely will you read about the downside and risks, other than in a very finely printed disclaimer at the very bottom.

Brokers and market makers understand that, for a trader, the market is essentially like a casino. The same temptations and emotional responses apply. So, it’s not in their best interest to paint a picture of reality for you; they want to paint a picture of fast, easy money. The news, prices flashing on the screen, and charts zig-zagging up and down are like a constant “fix” of dopamine for a trader; in other words, it can easily become a dangerous addiction if you let it deceive you. For you, this is extremely profitable for the trading industry as a whole. Not so much.

It’s rare, but some bad brokers (often offshore and unregulated brokers) might be working against you, either with bad pricing and execution or by making withdrawals difficult. I don’t mean market makers, which are not all evil, as some people believe; we are talking about simply bad people running bad brokerage outfits who have zero accountability or ethics. Choose a reputable broker who is well-regulated and has a good reputation. For those interested, I currently trade with this broker platform here.

How to avoid the deception

You need to be more of a defensive trader than an offensive trader. Your goal should be to keep your money, not to just trade as much as possible (and lose it). Most traders start out with a very offensive mindset, whether they would admit that or not.

By approaching your trading with the goal of building your account slowly and preserving your trading capital, you have a much greater chance of profiting over the long run.

Always remember, no one cares more about your money than you. Don’t believe the hype; trading is not all “sunshine and rainbows,” and I’m not trying to be negative at all; I am trying to be real so that you understand and know the truth and can learn from it.

Once you do make some money trading, you need to commit to withdrawing some of it each time, say 50% of the profits. There are a number of reasons why you need to do this, including securing that money so that you don’t lose it to the market, but also because when you withdraw it, it becomes more real to you than just digits on a screen.

There Are Absolutely No Short-Cuts to Trading Success

The trading industry misleading people about “shortcuts” to trading success and “fast money” is probably the most perverse and common problem that this article talks about.

Without trying to sound like a serial pessimist, the truth about trading is far different from what is portrayed in the popular financial media and most online trading education sources. Hey, don’t shoot the messenger; I am just trying to spread the word so that you don’t end up in the heap of 90% of traders who end up losing over time.

The mental image of the slick Wall Street trader driving around in a Lambo and living in a New York penthouse is what floods many beginning traders’ minds as they first get lured into trading by the “powers that be.” It’s good to have goals, even lofty ones, but you have to keep your feet grounded in the reality of what it takes to achieve them. Trading is, at best, a get-rich-slow game, and the more you try to make that “fast money,” the more you’re going to struggle and ultimately lose. I won’t get into all of the reasons “why” in this lesson, as I’ve written extensively about this in other lessons. But just keep in mind that there are no shortcuts to trading success; this is a long game, and you must be in it for the right reasons and committed to proper trading practices if you want to have a chance at consistent success.

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“If you don't find a way to make money while you sleep, you will work until you die.”

- Warren Buffett


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