trading components

primary components
Three primary components, inextricably linked together. One can't operate without the other. To succeed, it's necessary to understand each one.

Overture's search statistics for January 2006 found 98% of searches were for "tools" in a ratio of 821,000 to 1,000. That's 820 to 1. Indicating an overwhelming focus on the tools segment. With just 2% on the other two segments. Not surprising, considering almost all "trading" sites offer solutions and tools only. Verifiable statistics. As always, don't take out word for it, check it out for yourself.

This site examines, in detail, the internals of all three segments.

While you can buy a saw and a hammer, doesn't mean you can build a house. It seems most people, spend their time, searching for the best "tools", but overlook learning how to build a house. End up waiting for the tools to do it for them. Wondering why they finish up with a house in the middle of nowhere, in a swamp full of crocodiles.

Learn how to build the house, select the best materials, the best site. By then you will know what the best tools are.

Anything worth doing, is worth doing well. If you must do it, do it right.
Skilled tradesmen know their tools. Skilled tradesmen never blame their tools.

In case you don't know about saws, think about this selection. Each one does a different job
bandsaw, circular saw, handsaw, crosscut, ripsaw, hacksaw, keyholesaw, jigsaw, tenon, chainsaw, bowsaw, copingsaw .. etc.

Each primary component has intermediate components.
Each intermediate component has sub-components.

no-one can be taught how to trade
Many organizations offer to teach you "how to trade". It's an impossibility. You can't teach someone how to play football, or tennis, or to be an athlete. Only techniques and skills (i.e. the components) that make up the game, can be taught. Not all will have the natural talent to become top athletes. Excellence is achieved by learning, then combining and applying the component techniques and skills that have been taught. The student must do that themselves. By practice. And Coaching. The components are practiced and perfected. Repetitive drills. The best Adidas T-shirt with 3 stripes, or Nike running shoes, do not create a top class athlete.

Any doubts about the validity of this should be dispelled by an 8 page article by Daniel Coyle of the New York Times Sports Magazine on how they make super-athletes.

Blind Shaolin Master tells Grasshopper-Caine "When you can take this pebble from my hand it will be time for you to leave". Only then will I have taught you all I know.

Can you teach a novice how to practice medicine. No. They must first become a doctor.
Can you teach a novice how to be a doctor. No. They must first be taught the many components that comprise medicine.
They must then be examined on their knowledge of each component and achieve a level of competence.
They must then demonstrate a level of proficiency in each component.
Some may then choose to specialize in one particular area, or group of components.
How good the novice becomes, will depend on determination and natural ability.

An example. Try teaching the meaning of the equation e=mc² without first defining and teaching what energy and mass and light and speed and the mathematical square are. Einstein's connection between energy and mass is expressed in the equation e=mc². Where e represents energy, m represents mass, and c² is a very large number, the square of the speed of light.

Non-accredited universities now offer mail-order Ph.D's, Masters degrees, and Bachelors degrees in the field of your choice. For a fee. No work required.

which tool
Because of the variable nature of each trading day, no two days are the same. The task is deciding which tool - or combination of tools - to select for the day. In the tools department the main options are software and wetware. Software, by its nature, is a fixed set of instructions that is unable to adapt to changing conditions. The challenge for software developers is to produce a master program that can determine which set of software tools are appropriate for the unfolding conditions. Which takes the requirements into the realms of adaptive neural systems.

hardware v software v wetware
Hardware is fixed in the short term.
Software is a fixed set of instructions.
Wetware is the most adaptive tool available.
source - Greg Iles - Dark Matter - 2003
"The human brain is slow in terms of computing speed. But it is massively parallel. For processing, it is capable of making 100 trillion calculations simultaneously. Together with the equivalent of twelve hundred terabytes of memory".
Computers are sequential. The power of a single computer is determined by speed of the CPU. Maximum performance is achieved while running one application. With multi-threading, additional applications can be run. The performance of second, and subsequent applications are achieved by reducing the resources allocated to the first application. True parallel performance is obtained by the use of "dual" processors. The brain is equivalent to 1 million low speed "dual processor" computers.

to begin your journey
learn about the inter-relationships between the following four market segments.
learn about arbitraging. What. Who. How. Why. When.
learn about the 4 segments from the perspective of writers of the derivatives.
when you have learnt that fully you will begin to understand.
we are advised CFD's are responsible for driving 40% of activity in the physical stock market.


a million different ways
Trading is a serious game involving serious players. Rarely done for fun or mental exercise. Its an expensive game to play. Success demands excellence. This site is a series of articles which are building blocks, not a how-to handbook. What to look for. What to look at. How to look. There are a million ways to trade. How you trade will be the sum total of the building blocks you use. Regardless of whether you use the ones presented here.

Take 5 building blocks, and using one, there are 5 alternatives. Take 5 building blocks and using any 2 together there are 32 possible combinations. With 20 building blocks the possible combinations exceed 1 million. At any moment in time.

camron's razor - the simple solution - with 50 basic building blocks, and 635bn permutations - the options are -
(a) learn the 50 building blocks, select 20 that suit you, and from those create 10 combinations that suit.
end up with just the 10 possibilities, and a full understanding of what you see, and how they work. or
(b) keep working your way through the 635bn possibilities.

The lessons contain a number of scattered topics. They are inter-related. You might well ask what does visual perception, psychology of sight, probability, logic and memory have to do with trading. Read each topic and see the connections.

undressing the market
For the "rules of logic" and "law of simplicity" see Occams razor. Trading is a complex-compound, made up of a number of component activities. To understand an activity, you need to understand the components involved. To understand the form and structure it is necessary to know the composition of each component in order to understand its function. Each component needs to be studied separately. This research is based on behavioural analysis by breaking it down into its component parts. The main participants can be identified and their significance measured. Major traders comprise approximately 80% of the total daily volume of the SPI200. See Paretos principle. A small number of causes is responsible for a large percentage of effect. Behaviour changes from day to day.

source - 2002 - Luke Whitton of Traderspace Ltd. "Who Wins at the Futures Game?"
It is a well known fact that over 90% of people who speculate in the futures markets lose money. A daunting statistic for the novice trader, interested in trading futures for the first time.
Further. Most, if not all, new traders use technical analysis and charting. Brokers, and other sources indicate 90% of all new traders fail in the first year. Estimates are 60% of the 90% disappear and never try again. Quote 2005: The manager of one of the larger international futures broker is on the record as saying that after 25 years in the industry, he had yet to meet a successful SPI trader who has made money trading the SPI using charting. end quote. Straight from the horses mouth. Not a good recommendation for technical analysis. Good for the seminar business. It clearly indicates something additional is required.

Additional information