Why do traders stop at traffic lights that are green?
OK, it’s a metaphor, but there is a real message here that is critical for a trader to understand.
Many traders spend weeks – months – years developing trading strategies. They believe that they will arrive at the perfect strategy and will convince themselves at some point they have found it.
In almost all cases this strategy will be dependent upon a pattern on a chart. I explain this pattern in my book and online course as FORM. The form is the SHAPE the chart takes as a result of price action.
Ok, so our trader has his / her strategy formulated ‘FORMulated’ the trader waits screen side for the ‘pattern’ to arrive. Arrive it does, and instead of clicking the buy or sell button the trader goes into mental revision. All manner of questions start to interfere with the finger trying to click the buy or sell button.
Now… the gurus and coaches will tell you that you MUST act. You MUST stick to the plan; you MUST push the buy or sell button according to what you STRATEGY (The FORM) on the chart is telling you.
Well……. not to be too succinct…. that is complete bo..llks!
The reason you don’t act is that you have SURFACED convinced yourself of your strategy. Your mind has recognized the FORM on the chart. However, there is a deeper part of you that KNOWS all is not as it seems. The deeper part of you knows that the FORM / SHAPE of the chart is NOT THE WHOLE STORY and as such will interfere with you executing your pending trade.
Ok so you might say
‘all I need to do then is go back to the FORM of the chart and convince myself some more, and then I will be able to act.’
However, this will not work because you will find yourself right back at the traffic lights in a few days.
So what is the problem? What is the solution?
The problem is one of CONTENT. Content is what is behind the FACADE of the FORM the chart takes.
When a trader understands the huge discrepancy between form and content, then that trader is at a fundamental turning point in their trading.
The trader that trades CONTENT will never be stuck at the traffic lights because the knowledge of WHY they are acting, why they are taking this trade is rooted in what is the content of the SHAPE / FORM of the chart before them.
Understanding CONTENT is the key to being able to consistently execute a trading plan.
The day you learn how to read CONTENT is your first day of freedom as a trader.