Chapter 10

Transcending Common Trading Pitfalls

Everything is real and is not real,

Both real and not real,

Neither unreal nor real.

—Ngrjuna

One of the most important ingredients for success in speculation is trader psychology. This chapter, along with Chapter 11, shows how to remove destructive biases preventing or limiting success in trading. Chapter 12 provides traders with a wide array of tools to reinforce productive trading behavior.

CHARACTERISTICS OF MARKET BEHAVIOR

What can be said about market behavior without exception or contradiction? All market behavior is multifaceted, uncertain, and ever changing. By distilling trading to these essential truths, we prune away any and all extraneous delusional trading biases that prevent or limit our success.

Multifaceted

Beginners always seek a simple solution to successful trading. Success, unfortunately, requires a robust, complex solution, which I call the casino paradigm. Our inability to provide novices or outsiders with a simple one-line explanation of how successful speculation works stems from the complex, multifaceted nature of market behavior. I often say there is no tic-tac-toe solution to market behavior; it is instead like three-dimensional chess.

The three-dimensional chess analogy confuses beginners because speculation ...

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