At the start of each trading session, you will receive an email with the author's new posts. Andrei is a professional trader, coach and fund manager which makes him a fine observer of the trading world, its technologies and actors. We conclude with a reflection on the role regulators should take in the years to come. Who is Andrei Knight? Andrei Knight is a leading fund manage and trading coach.
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All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. Close alert Thanks for following this author! Close alert You've unfollowed this author. You won't receive any more email notifications from this author. Would traders be more successful by integrating Western and Eastern philosophies? Chess taught me to study my opponents' tactics and to plan several moves ahead, while martial arts taught me to keep a level head in stressful situations, as well as the value of patience.
It is said that when the legendary swordsman Miyamoto Musashi was involved in a duel, the fight lasted exactly two moves. First his opponents would finally lose their nerve in the stare down and strike, and once the attack was seen it could then easily be countered and retaliated. This is certainly a lesson many traders could benefit from - who moves first often loses. Being fast is not always the best option The 1 issue I run across in coaching other traders is their impatience.
They feel as if they're not participating unless they are in a trade, and as a result spend too much time trading or most often sweating , and not enough time on analysis, practicing core skills, or simply watching the markets to get a feel for their "mood" on a particular day.
So many of the losses are caused simply by jumping in or out! And what about the financial world? As for the broader financial markets, I suppose they would be a bit better if more emphasis were placed on honor, integrity, and most of all on never-ending self-improvement.
I think the giant leap forward in trading education came with the advent of online conferencing software. It is simply amazing that I can share my desktop and charts in real-time with traders all over the world. I can also wear a headset and speak out loud as I analyze a trade set-up and evaluate reasons for getting in, staying in, getting out, or staying out as I point to various candles or indicators on the chart. Plus, they can type their questions or even upload their own charts for evaluation.
This is an interesting duality: This is a giant leap forward, as previously doing a workshop involved hopping on a plane and flying out to their city which I still very much enjoy doing when the opportunity arises, but obviously this approach has limitations. And, thanks to internet video, I can also record my workshops and make them available for people to watch at their own convenience.
It is really an exciting time both for those looking to learn, and also for those providing that education. What will be the educational model of the future? Well, I cannot imagine how the technology can improve further. Faster bandwidth, sure, and there's always tele-presence - though I'm not sure seeing my face bigger or in 3D necessarily equates to better education.
Where the main advances will come, I think, will be more in the form of a broader spectrum of traders adopting the current technologies. You no longer have to face the markets alone.
The main benefit of any strategy is its ability to help you understand what the markets are in the process of doing. Different minds interpret data in different ways. I do not think that any one strategy is necessarily any better than any other, it is more a matter of what makes sense to YOU.
Can you understand it, can you act on it? And does it generate the sorts of results you're after on a consistent enough basis? Certainly, there is a little bit of a "fad" factor - different strategies are always coming into or out of favor. And there are always the "standards". Pivot points have been used by floor traders for nearly a century as well.
Candlesticks were first used by Japanese rice farmers over years ago in order to plan next year's planting according to the consumption patterns from prior years. Will the market continue to trade with those well-known but old approaches? Or do you see the inception of a new strategy that will impose itself?
Techniques that stand the test of time do so for one simple reason - because they work. And I'm sure with time new ones will be developed as well, but I don't think that necessarily means that the good ones we use currently will fade away as a result. You are a player and also a trader.
What is your experience of the relationship between gaming and trading? Gaming's relationship to the financial markets is a funny thing. I'm reminded of all the times I've had to stand up on a stage at some trading conference in a Las Vegas hotel, and tell a room full of people that responsible, well-planned trading is not the same thing as gambling. It isn't, but there are similarities. Both involve some element of chance, sure. But the major differences are that in gambling the house always has the advantage, while in trading through proper money management and analysis you can choose to act ONLY when the advantage is unfairly tipped to your side though, sadly, the vast majority of traders do not exercise this power.
Then, after the speech, we all meet in the casino downstairs to blow off some steam. Do you think gaming industry and financial markets will merge into a new technological approach to trading the markets? There's certainly been more and more gaming companies appearing on the Forex scene, largely due to the tax advantages offered on spread-betting in countries like the UK and the Netherlands.
In places like China and the Middle East, where gambling is forbidden, you often see people trading not purely for financial gain, but also very much for the entertainment factor. How could Forex traders be inspired by gamblers? The biggest thing that Forex traders can take from gambling is money management. If you watch a professional Blackjack player, they are always varying their bet.
Amateurs will sit at a table and plunk the same 1 or 2 chips down each hand and, slowly, their pile of chips will shrink over time.
This is because, statistically, you can expect to lose 3 hands for every 2 you win. A card-counter does not literally memorize every card of a deck. They simply keep a running tally in their heads - high cards add 1, low cards subtract 1, medium cards do nothing. The idea is to know how likely it is that you'll bust out if you ask for another card, or how likely it is that the dealer is sitting on a Blackjack. And then you vary your bet accordingly. When chances are higher that you'll win, you put more chips in; and when things are uncertain, you bet less.
Forex traders could learn a lot from this in regards to their own money management. It takes more than a good signal to trade successfully, you have to understand probability and risk: What counts is not only your win-loss ratio, but how much bigger your wins are than your typical losses. How do you think the Forex world could become more professional? Certainly there are a lot of scams and unsavory characters out there. But there are also lots of legitimate firms with good products, and a genuine desire to help traders or make consistent profits for their clients.
The retail side of the industry is still relatively young and has some "growing up" to do, much like commodities firms were considered the "rouges" of the 70s and 80s. Best thing firms can do to help Forex gain legitimacy is to act professionally, and treat their clients with respect.
The regulators could help things along by fostering growth, new companies, and new ideas, instead of fearing and retarding change and innovation. This makes it harder for legitimate firms to enter the market and compete effectively.
Most cannot afford a team of high-powered compliance attorneys, and those who can Bear Sterns, Lehman Brothers, MF Global come to mind aren't necessarily using their resources in the best interests of their clients and shareholders.
Meanwhile the scammers will continue to exist on the fringes and by and large ignore regulations anyway. What I think we need is a dialog - regulators need to be open to input from people on the ground, the ones who interface with markets and clients on a daily basis.
The foreign exchange has been there since man's earliest times, and always will be. Regulators cannot change the world's need to exchange currencies, what they are trying to influence is how those exchanges take place. In the US, there certainly seems to be a move to bring this trading back to the more traditional exchanges. People complained when Forex was limited to We are somewhat spoiled in Forex. But I do think the regulators are somewhat short-sighted in their approach What kind of technologies do you see traders using to analyze markets in the future?
Overall, I personally think the future lies in social networks. There are already many sites where you can connect with others and trade as group. Some brokers are starting to offer this service as well, as are educators like myself.More...