by Rick Ratchford
During my 15+ years trading Futures and Commodities, and now 10th year managing a Trading Membership, I have come to note that a great majority of less experienced traders are in search for the “Easy Way to Trading Riches Plan”, which simply does not exist. Most often, telling them this gets nowhere. As has always been and always will be, most will not learn until they have been met with enough discomfort (due to great losses) to get their attention. Unfortunately by then, many are unable to recover either financially or psychologically.
FUNDAMENTAL and TECHNICAL GROUPS
When it comes to determining what to trade or not to trade, and when to trade it, we as traders are faced with the problem of how we are going to go about making these decisions. The path we decide to take falls within two camps of thought, that of using Fundamental Analysis, or Technical Analysis.
Although many who learn about trading Futures and Commodities start out thinking that making decisions whether to buy or sell starts out with knowing if there is a drought, flood, big or small harvest (Fundamental group), most end up looking for answers within the Technical group (using indicators on price charts). Naturally there are those that will glean from both groups to help them make trading decisions.
But whatever group one subscribes to, whether it be the Fundamental or Technical group, there are no easy answers to what one should buy or sell, or when for that matter. In other words, you are not likely to find a trading plan that is both consistently profitable and requires no effort on your part as a trader.
SUCCESS is NOT INTENDED TO BE EASY
Let’s face it. If success were to be easy to attain, everyone would be successful. Can we agree on that? In reality, the percentages clearly show that only a minority of those who trade can be considered successful at it. This small percentage of traders had to do something that most traders are not willing to do, they had to be willing to sacrifice their time and resources in order to achieve.
It is a sad picture to see on nearly a daily basis individual traders who do not wish to put forth time, effort and money to get ahead. Many, strangely enough, expect everything to be handed to them with a nice pink bow on top. At least for most of these, when they do not get what they want handed to them, they simply fail at trading and go do something else. Unfortunately there are a few that project their failures onto others, become like a child throwing a tantrum, and blame every party but the actual source (themselves) for their inability to achieve.
One recent example of this was the result of a special article that I posted on one of the trading forums dealing with W. D. Gann. Within that article, I provided all the information one needed to come to a conclusion that exposed what traders should focus on when it comes to all the things taught by W. D. Gann. Within that article, however, I did not simply say what that was. Rather, as it took me some time to realize the answer myself by studying the material presented in that article, I simply shared the material and let all those who wish to do the same know that there was indeed a valuable trading gem within its message. One person started out by asking directly “what is the secret within?” Again I reiterated that this was to be known by only those who wish to study its contents with careful thought. In other words, only those with a true desire to put forth effort and had true desire to learn. The individual then made a few bad guesses and became inflamed when I refused to just ‘hand him the information’. Of course I again suggested he study the material carefully only to be accused of ‘playing games’ and ‘not knowing the answer myself’. To this day he spends a great deal of time flaming my public contributions rather than spending all that time towards getting past doing nothing to become successful.
W. D. GANN
There is little doubt in my mind after years of studying the materials I have acquired of W. D. Gann’s teachings that the man was a genius when it came to market analysis. While many will debate far into the future whether he was truly worth $50 million or only $300,000 back in the 1950’s (still a large sum by today’s standards), his works speak for themselves.
Part of W. D. Gann’s approach to teaching had much to do with veiling key points to his most prized techniques. Rather than just telling it all in easy to follow steps:
Step 1: Use my Squares of Nine to solve price off major lows and highs.
Step 2: Divide X by Y and add to Z and you will know the exact day for the low or high.
He provided bits and pieces that required the student to put forth a great deal of time, effort and careful thought before anything would be revealed. It is my understanding that he did this on purpose because he felt that this information should only go to those who are willing to give it all they have and not be looking for hand outs. In this I have to agree with Mr. Gann. In all my years in this business, I have found that many who just want everything handed to them make lousy traders anyway, and often they tend to be the ones that whine and complain about their trading or that of others more than anyone else. Jesus Christ is quoted as saying in Matthew 7:6: “Do not give dogs what is holy; and do not throw your pearls in front of pigs, or they may trample them and then turn on you and tear you to pieces.” (Jerusalem Bible).
W. D. Gann, being reported to be a religious person, no doubt subscribed to these words of wisdom and so was careful in delivery of his most prized knowledge. He gave just enough to prove that he was indeed in possession of these rare gifts, did some forecasting that further proved his insight, and then gave others the opportunity to discover more if they were indeed appreciative of his works. Those that would not would remain in the dark, and as I have also experienced over the years, will be subject to ridicule and flaming on public discussion forums (“…and then turn on you and tear you to pieces.”)
Like most traders, I started out thinking that making money in Futures and Commodities was all about crop numbers, weather patterns, and other fundamental data. The subject of Technical Analysis was new to me. Because of my background in computers, I was naturally drawn to Technical Analysis.
From my transition from Fundamental to Technical Analysis, I suffered like most new traders did in actual trading. My early failures and occasional successes became the most important teachers I had at the time. With each failure I learned what did not work and with each success what might work. What I did not do was to allow myself to quit just because of all the setbacks I experienced. Instead of getting upset at myself or others, the desire to master market timing and to get control of my emotions burned hot inside me to push on with an open mind and tireless drive.
What I discovered first is that success was not meant to be easy. It only came to those that believed it was possible to achieve and who did not quit in trying to achieve it. My desire was to become extremely good at market timing and to find for myself the best ways of achieving this. Once a person is able to do this, half the battle then has been won. The other half, which is much more difficult to achieve although not impossible, is mastery over the emotions involved with trading. As an emotional being, this aspect of trading continues to interfere in many of my personal trades in spite of excellent timing. There are many, many times I had forecasted a major new market trend in advance only to capture a very small percentage of the overall move. While my analysis was spot on, and there are some gains to this, much is left on the table due to the emotions getting in the way. If you are new to this idea of emotions being a part of trading, just think of FEAR and GREED and perhaps you will go “a-ha”.
When an inexperienced trader, or one with lots of experience (but in losing) says they are looking to win trades without a whole lot of effort, it becomes apparent to me that they are likely doomed to fail in the end. Just think about this for a second: When you think of the word “Technical”, does that conjure up in your mind “easy”? When someone thinks an explanation is a bit over their head, you’ll often hear them say “can you be less technical in your explanation?” Less technical or not technical at all must equate to EASY then. Therefore, you have a choice to make.
EASY or TECHNICAL
You either want do to things that are easy or you want to use Technical Analysis. That is not to suggest that Fundamental Analysis is easy. Far from it, Fundamental Analysis may actually be more difficult than Technical Analysis. There are just too many variables to consider.
Yet most traders tend to be drawn to technical analysis while many of these are looking for an EASY way to use it. The question then that aches to be asked is: “Do you want EASY or do you want TECHNICAL analysis?”
It is my personal opinion that Technical Analysis offers an excellent way to time the markets. Yet Technical Analysis is not a standard set of rules or tools. It encompasses many different indicators, different uses and interpretations for these indicators, many different techniques and approaches including those considered esoteric (i.e. W. D. Gann and related). With all the different indicators and all the variables of how they can be used, who in their right mind thinks that using them is going to be easy? Bottom line is this: Once you have determined that Technical Analysis is the path to take in order to become proficient in market timing, you then have many more forks in the road as to which way you intend to further your education. If you think this is all going to be figured out by tomorrow, then stand in line with the majority who will struggle and eventually be out of this business the following day.
Bottom line, you will have no choice but to spend endless hours and a good sum of money in order to achieve your goal of market timing. And if you do not think you need to be good at market timing as a trader, then you are sadly mistaken. Sure you can let someone else trade for you, but then you better hope that person is good at market timing or you’ll not see your money again. But if you want to be your own trader and make all the decisions as to what and when to trade, then you need to find the right tools and the right way to use those tools to achieve your timing goals. That will take time. That will take money. That will take desire. That will require that you do not quit. Those that quit never make it to the finish line.
Once you come to realize that the path to market timing is not going to be an easy one, and once you have decided you are willing to work hard to become better at timing each and every day, then you will be ready to overcome all the hurdles along the way. Do not be mistaken to believe there will not be any hurdles. You will likely come upon many of them, including those internal to you such as discouragement, frustration, creeping impatience, and many other enemies from within. Your emotions will be your worst enemy. It is like that little devil that appears on one of your shoulders that tells you to give up, to go easy on yourself, to not try too hard. On your other shoulder will be that angel within that tells you to ignore the little devil’s bad advice, to keep at it, to not give up. Oh the inner struggles will definitely be your biggest hurdle and one that you may have to deal with for most of your career as a trader, assuming you make it that far.
So try to keep this simple thought in mind: Success requires that you separate yourself from how the majority thinks. The call to ‘take it easy’ is the theme of failure. Do you wish to have this as your banner? If not, then push ahead. Every inch you gain in knowledge due to putting forth effort is indeed an inch closer to the goal line. Pushing forward itself suggests effort and persistence. Nobody can win a race of any kind without effort and persistence. ENDURANCE and DESIRE must be your calling card. You must have an open mind to ideas before foreign to you. Look at how many dismiss the ideas of W. D. Gann, for example. Yet history testifies that Gann was a market timing genius. Is it wise to dismiss Gann’s market timing ability because some question whether he was rich from trading or selling his books? Again keep in mind that market timing is only part of the equation. You’ll need to master your emotions and you are not likely to be able to do this with 100% control. But you need to keep at it anyway.
So keep working towards becoming a better market timer. And keep working on getting control over your emotions to the best of your ability.