This morning I start with just a bit of housekeeping. Like any business, support is a necessary component to success. TraderPlanet, as a business, needs your support. If you follow Trader Ed, and you haven’t signed up on TraderPlanet, please do so. It costs you nothing, and it is quick to do so. All you need to do is go to this link (http://www.traderplanet.com/join/574) and give up just a few minutes of your time. By doing this simple act, you help support all of the people who give up their time to write about what they know, trading. Thanks so much for helping out …
The following is a comment from a loyal and smart reader. This gentleman has sent me comments before and I have always found him to be insightful and solid. I thank him now.
I read your article about research when you refer to Warren Buffet and how he could not have made his fortune without fundamental analysis. You also mention that there are only “lucky” traders that make $ using technical analysis. I couldn’t disagree with you more on that statement. The worlds best traders: John Henry, Paul Tudor Jones, Ed Seykota, etc.. are all trend traders and all use nothing but price to guide their decisions. They admit they know nothing about the markets they trade and let’s be honest neither does anybody. The only factor that cannot be disputed is price. The market is always right and that is the only indicator I’m concerned with. Thanks for your continued contributions I’m a committed reader of your column.
All of what he says above is correct and thoughtful. The only quibble I have with his comment is the line in bold above. My friend misinterpreted what I meant, although I could have written it more clearly. In the second bolded quote below, you will see that I don’t suggest technical traders are lucky; I suggest no one achieves anything in life without knowing what they are doing. This is the point. Research to understand what you are doing, whatever that may be. In the case of the market, at a minimum, research to understand the market. The first bolded line below points out that I acknowledge technical trading is a viable path to successful trading, but like any other successful person, the folks he mentions all researched the heck out of technical trading to understand why, how, and when to do it.
Now, if you rely on charts to give you your trades, and you are doing well, jump past this, but if you rely on finding good trades that are fundamentally sound, don’t jump past this. Stick it in your brain and start doing it.
By the way, research is not just for finding trades. It also provides information that allows you to understand the big picture, which allows you to develop and implement your strategic approach to trading. In short, research makes you a better trader in many ways. So, get off your dime and start finding trusted sources and resources that will inform you and help you learn what you need to learn to make money at this game.
Do you think for one moment that the analysts on Fast Money, for example, don’t spend hour upon hour researching? Do you think Warren Buffet achieved his fortune relying on charts? In fact, do you know anyone (other than the lucky ones) who ever achieved anything without understanding what exactly they were doing? Research breeds understanding.
Trade in the day; invest in your life …
Trader Ed
