Why ‘Magic’ Trading Systems Won’t Work?

Stock market is an imperfect entity. That means, in stock market, for every new buyer, there emerges a new seller and vice versa. If you are going to buy a stock, derivative or any other financial instrument, there is always a person on the other side who is selling it at the same time. The saddest part is that, only one of you is going to make money. A buying opportunity for someone is a selling opportunity for another.

Why this kind of imperfection exists in the market? I have always pondered on this phenomenon ever since I started doing the business of financial investing and trading.

Stock markets in every country is driven by human beings and their decisions are controlled mostly by human emotions such as greed, hope and fear.

We, human beings are imperfect in every sense. Sometimes we are right and sometimes we may go wrong. Some people see the opportunities which are ignored by other people and some others miss the opportunities, which are obviously seen by majority of people.

Like every sport or game, stock market requires losers for winners. Someone should lose for someone to gain. Darwin’s evolution theory-‘Survival of the Fittest’-comes into play in stock market every single day.

Every trader or financial institution has a hidden agenda in stock market. A hidden agenda or strategy to steal wealth from other players. That too, legally! Bulls and Bears fight with their predatory instinct to slaughter each other and to win.

Most people think that financial trading is a gambling game. But I totally disagree with them. To my mind, its nothing more than legalized looting! Smarter of the smartest comes out of the market with bags full of other peoples money. While the weaker of the weakest get ruthlessly slaughtered. This is my understanding of how stock market works. And its true!

A trading system can be a combination of a trading style, a trading plan or strategy to gain profit in the market. It is a trader’s or investor’s weapon to make money in the stock market. When a trader creates a trading system, he should be very careful that it should be very much in accordance with the personality traits and skills of the trader. Otherwise it wont work in the market.

When I started doing this business, I got few friends who were good traders and possess excellent trading systems with them. Those were day trading systems good only for Intraday trading. For months, I traded with them and made money for myself as well as for my clients.

After learning how to trade, I went all by myself and started trading with that system at my home. The day I started trading all by myself using their trading system, my clients and I started losing money.

The trading system was excellent with good timing, but why we lose money? It was because, the trader who was using it (that is me) doesn’t possess the personality traits that a Day Trader requires. I’m very weak in making lightning fast decisions. I always need some time to take wise decisions. More the time, wiser the decision will be. Day trading is for people who can take quick, right decisions and stick on to the position till it achieves the target. I’m not suitable for that.

Today, I have recognized my trading personality and changed my style from Day Trading to Short Term Speculation. I also created a trading system which very well suits my personality, trading style and skills. I’m highly comfortable with my system which is giving good returns for my clients and to myself.

As I mentioned earlier, it is my hidden agenda or strategy to legally steal other people’s money in the market. So, obviously, I’m not ready to disclose my trading style or system to anyone. No informed trader or investor does that.

Ever since I entered this business as a private trader, I have seen greedy stock brokers who drain their clients’ trading account for brokerage fees, crooks who sham themselves as stock market gurus and give false advices and ‘tips’ to ignorant people for heavy fees, idiots who act themselves as stock market analysts and sell pirated technical analysis software as sure-shot profit winning trading systems for hefty prices. Sadly I have observed the deceivers and the deceived.

For years, I was a private trader and was operating from my home with few clients. But this year, I was fortunate enough to take up an office in my home town and expand my business a bit.

But since the day, I opened up the office, I got numerous phone calls from people who are ready to give trading/investing tips, obviously, for hefty fees. Few of them even came up to my office and tried to sell trading systems.

They call it ‘magic’ trading system where buy and sell signals are automatically given by the system. So the trader can just relax at his armchair, neatly fill the trades and gain enormous profits. Cute, isn’t?

Cute, but its not going to work!

These ‘magic’ trading systems won’t work in long run and also drain the wealth of the persons who are using it.

The reasons are quite simple. Firstly, the trading system should match with the personality of the trader or the person who is using it. In most cases, it doesn’t match. Secondly, it should work both in trending and range bound market conditions. Most of the systems don’t work in both market conditions. Even if it works and more people start using it, eventually the stock market will discount the system and ultimately, it becomes useless.

I’m absolutely convinced that I’m in the midst of a financial trench warfare. I feel so amused as well as annoyed when these cheap salesmen comes into a trader’s office and try to sell a weak, useless weapon which they have already sold and also selling to everyone!

Just imagine a war where everyone possess the same weapon and fight with each other. I cant term it as a war, it would be more or less like a comedy movie scene!

Are these people, good traders or investors? I’m very much sure that they aren’t. And what are they? They are just cheap salesmen trying to sell useless stuff to ignorant people. By doing this they are trying to bring efficiency into a highly inefficient, trillion dollar market which is capable enough to bust the trading accounts which tries to go against it. No one is bigger than market. Moreover, market is always right.

There are no shortcuts to success. Financial trading or investing requires endless hours of learning and a life dedicated to the pursuit of knowledge. I love the process of learning and gaining knowledge. And this love affair keeps me hanging on in this arena. Other than that, trading or investing is one of the most boring professions ever invented by mankind.

So beware of fake stock market gurus and ‘magic’ software vendors. Try to develop your own views and trading systems. Be on your own. Happy and profitable trading!

Image Courtesy: Internet

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