Separating Trading Fact from Fiction

As experienced traders, we've surely encountered various popular trading clichés over time… Many are repeated so often that it's easy to assume they reflect factual truths. However, some maxims may actually be more fiction than fact when held up to logical scrutiny. Today, I want to analyze five common trading beliefs that I've heard debated quite a bit to determine if the reality matches the mythos. Specifically, let's weigh the credibility behind: 1. Secret Price Levels Known Only to Trading "Pros" This claim suggests that professional traders employ undisclosed price points, predictive algorithms, or proprietary strategies that supposedly give them an unfair advantage over retail traders. For the right fee, some even promise to reveal these secrets. Too good to be true? Reality Check: To move any market requires participation and trading volume. By definition, anything truly secret cannot involve too many active traders or it would no longer qualify as privileged insider knowledge. And given the highly-competitive nature of trading, any consistently profitable secrets get copied quickly. Pros trade complex strategies beyond retail's long/short game. 2. The Trend is Your Friend This often-repeated trading mantra states that identifying and sticking to prevailing trend directions leads to better profits due to reduced whipsaws. Fighting clear momentum typically translates to more losses and abandoned gains. No doubt this maxim speaks truth - trading against the herd usually gets you run over. But even experts cannot predict trend longevity or discontinuities with certainty. No trend lasts forever either. Traders fixated solely on chasing trends often get mowed down when the table turns without warning. Being adaptable to changing contexts separates success from failure once markets shift gears. 3. Money Management Can Make Any System Profitable This trading myth contends that sound risk management principles could somehow generate consistent profits even using random or mediocre trade entry systems. Reality Check: Money management and risk controls surely serve as the cornerstones to long-term trading prosperity. But no degree of defensive trading can itself produce profits. By definition, gains necessitate losing counterparties - you simply cannot profit if no one loses on the other side. Sophisticated algorithmic traders spend countless sums and employ PhDs building elaborate predictive models. If defensive money management alone held the golden key to trading profits, then these quant wizards could simply save themselves hassle and hire monkeys tossing darts at tickers instead. 4. Take Care of Your Losers and Your Winners Will Take Care of Themselves This maxim says focusing risk management on losing trades reaps better rewards than chasing profits without risk controls. Reality Check: Entering on optimal price levels, cutting losses quickly, and keeping risk low absolutely boosts bottom lines more than chasing wins without risk controls. 5. Risk-Free Trades Exist A common marketing tactic for expensive options programs promises accessing certain complex spreads and strategies that supposedly carry "no risk" mathematically. Reality Check: Every trade carries risks, even if hidden. And for each trade's profits, another trader lost money – no free lunches in markets! [If you want to read more about this, go HERE>>]( While coming clean about trading clichés representing more fantasy than reality may burst bubbles, truth and transparency serve traders better in the long run… I enjoy analyzing these popular maxims more critically to stimulate discussion… Please feel free to reach out with any trading myths you come across that deserve deeper debate! Peter Jigsaw Trading & Journalytix Copyright © 2023 Jigsaw Trading, All rights reserved. You are receiving this email because you opted in at www.jigsawtrading.com or www.journalytix.me Our mailing address is: Jigsaw Trading Room 1203, 12/4, Tower 3, China Hong Kong City 33 Canton Road, Tsim Sha TsuiKowloon Hong Kong [Add us to your address book]( Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](.