Friday, June 12, 2009

Trading is Like Starting a Fire with Flint & Steel



Trading Forex or futures markets is like starting a fire with flint and steel. A lot depends on your kit and your skill, but a lot depends on the elements. What you have in mind is building a nice fire. That would be a healthy winning trade. Striking your flint and steel together would be taking a position in the market. The tinder would be the amount you are willing to risk on the trade. The kindling would be having your trade go in your favor by the amount of your risk capital (tinder). A log would be the trend. Getting the logs to burn comes about by catching the trend and riding it.

The day-trader is always concerned with striking his flint with the steel and not getting burnt. Sometimes it seems to be raining or windy or both. You don't get much started. The experienced fire starter looks for the best kindling and tinder. Patiently waits for his trade to set up. The impatient one keeps burning tinder and char cloth but all too often the fire dies. Fire starting is a survival skill that can be learned. A forex trader who approaches the market as a problem in fire starting could do worse. We trade our beliefs about the market.