Investment Tips: Humorous rituals may not help you win the market, but the basics

Lots of people join technical analysis training programs, eager to learn new techniques that can help them pick that magic stock, get into that big trend, or get off to the top of a big move.

They emphasize the method shown by the presenter, always keeping an eye on the final result and paying special attention to the way the method is applied – which is always profitable.

Yes, there are stop losses to deal with adverse results and it is all for others. “Once I know this method,” they tell themselves, “my trade will all reach their goal of making a profit.”

There is another class – the reader. In the old days, they used to read books, but now they read short texts on the net. Life has become so fast, where is the time to read a book of hundreds of pages. I can get it all with two images in a two page writing. And if I read about five like this, hell, I’m already well-educated or, indeed, well-read!

The problem with both sets above – those who are going to be traders, remember – what they are doing is considered a ‘necessary step’ but without any compromise. The focus is to get to the bottom line. In real life, it is a lot like us when it comes to worship or fasting or attending temples or churches or mosques.

We all go through the motions, because that’s what we think is the deal. We all go through the ritual of offering flowers or candles or sheets and believe that we have done our job. And if we don’t do all these things, we feel guilty. Even the people around us, big or small, feel guilty about it.

This is the classic case of ritual. If the philosophy behind the ritual is not known, it gives rise to superstition. The interpreters of the Holy Scriptures will warn us of the dire consequences here and in the Hereafter, if we cannot ‘do’ in some way.

In the same way, traders also become superstitious. They have some ridiculous rituals that they believe are necessary for their victory. Some of them go to extremes to avoid doing anything to lose. A common translation of this in trading action is to take quick profit or avoid loss.

Understanding the method means understanding the value action. How many people really spend time in a training program, trying to understand basic value actions? What is a trend? Why the traffic? Why should the price pull back? Why does a trendline work? What is the relevance of Fibonacci retracement and why does it work? Bollinger should be wax and decay and if so, do I know it?

Alas! I find many of today’s stock technicians more interested in the bottom line or the last line than focusing on varnishing their basics. They all want to have a PhD without passing their school or college graduation. They think that schooling is enough to keep their education current by looking at the casual aspects of the PhD book or its subtleties on the net.

They think that they can eliminate many of the basics of price action analysis in favor of a few, explainable, computer-driven methods and expect great results. They will be from time to time. But long-term success? There is no possibility.

Price action is at the root of all market success. It doesn’t matter if your approach is technical or basic. If you do not invest your time to understand the behavior of the market price, and continue to invest it every single day, the market will hit you every day, every year.

Go back to your basics at every opportunity and re-learn them many times over After that, your chances of getting hit by the market will increase rapidly.