Modernist versus Traditionalist Approaches to Trading

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odernism and traditionalism as well as the various trading styles and method- ologies found within the markets are things that every trader should understand and appreciate. Modernism (as I use the term in this book) is related to propri-

etary systems used for trading, in contrast to traditionalism, which is based on traditional approaches used in trading smaller markets within the trading industry.

I hope you will understand there is a difference between modern and traditional systems and will explore the difference with an open mind. In general, I’ve found that learning something about the history of the forex, as well as a few of the different types of traditional signals, trading styles, and other concepts (information that is available to everyone for free or for a fee) helps you see the significance of trading the larger forex market while using proprietary tools instead of traditional software. This requires just a little personal research. After you learn the basics from this book, and after you develop a personal awareness about the largest financial industry in the world, your eyes should be open to the possibility of becoming a professional trader or, if you’re already trading, to becoming a better trader.

I must give credit to those who early on forged the way with research and devel- opment, often by trial and error. These traditionalists made it possible for everyone to enjoy the opportunity that the forex market presents today. Experimenting and seeking the secrets of success should never be ignored. Many traditional traders from Wall Street are the unsung heroes of the trading industry—as well as those who filed for bankruptcy along the way while looking to find the secret of perfected entries, stops, and limits.

In addition, there are others who had large amounts of money, which gave them the power to stay in the market: They made fortunes without much focus on either the

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technical approach or the fundamental approach to the markets. George Soros stated in one of his books that to be successful in the forex, a trader must have “sustaining power,” meaning enough money to survive market swings; many traditional traders be- came swing traders while not using stops. When the market moved against these traders, their hope was that the market would eventually come back to profits; and often it did. However, when losses did occur, the damage to margins was often so severe that some traders had to quit the industry.

With the advancement of technology and continued research into the market re- cently, Mr. Soros’s theory may not be true any longer. With a little research, you may find that some very famous traders and authors have either filed for bankruptcy or left the market with ongoing failures because they would not consider evaluating new, proven concepts and methodologies that have been developed.

There are many newly developed trading procedures and strategies available now in the marketplace. Traders new to the industry must remember that success comes only with effort. Many market explorers, research technicians, and traders have quit (or even passed away) just before success might have been reached. When I began trading, I reminded myself of how Thomas Edison struggled in the beginning of his most suc- cessful venture. When developing the lightbulb, he continued to forge forward, at great expense, attempting more than 1,000 (some say 10,000) time-consuming experiments be- fore achieving success. I also thought of the cheetah, which has been tracked at running nearly 80 miles per hour but nevertheless has to make an average of 100 attempts to kill one antelope for dinner. One success out of an average 100 attempts would discourage any new trader if this were the case in the market!

Many beginning traders experience losses just before achieving success, and most will give up trading with a bad attitude toward the industry or, worse yet, toward their mentor. I have met traders who believe that their failure means that someone else must be to blame, yet these same traders will always accept success and forget their guiding mentors. If you cannot be responsible for your actions in the market, you should never trade the forex. Jim Rohn, a famous speaker and author, once said that most issues re- garding failure are found between the ears.

I would suggest you keep an open mind to traditional trading styles, but also be open to the new systems and procedures that are developed every year to accommodate market conditions that seem to be changing constantly as the industry grows. Successful trading requires ongoing research and development, which only a few companies in the world are willing to share with the average everyday trader. If you’re new to the forex industry, it would be a good idea for you to consider locating a mentorship company that has a proven track record of success for personalized help as well as ongoing research. If you’re considering a mentor program, keep in mind that it is also helpful to have a development program in place to help you with support after you complete your initial mentoring session. If you are a beginning trader who is self-trained in the forex—and

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even if you have previous trading experience in traditional markets (e.g., futures, stocks, etc.)—your losses in the forex will most likely far outweigh the cost you would have paid for professional help.

“Some are meant to play the game, and then there are those who must teach.” Can this be true? What’s wrong with learning from a mentor who actually trades full-time for a living? Unfortunately, most mentors do not trade successfully, but those who do are more than willing to be certified properly. A certified mentor is more than willing to provide ongoing copies of his or her personal trading history as proof to a nonprejudiced third-party mediation group; as an alternate suggestion, mentors could submit instant notification to their traders as well as to the mediation group of personal live trade entries as they happen for a limited time period. This type of proof would justify the mentor’s or author’s credibility.

SOMETHING TO THINK ABOUT REGARDING THE HISTORY OF THE FOREX

Everyone associated with the forex currency exchange has opinions of how the forex be- gan, and extensive information is found all over the Internet. Since the forex has evolved into the largest financial industry in the world, the daily opportunity to become involved with it has created unbelievable growth within the exchange, which averages $2.2 trillion (as of July 2005) with surges in the market toward $6.5 trillion at times. During a banking symposium held in New York City in July 2006 (sponsored by the FXWeekly group), it was announced that the daily volume of the forex had increased to an amount in excess of $3 trillion per day. This per-day volume of the forex is much larger than the volumes of traditional trading industries such as the stock market, which is, as of 2007, currently av- eraging approximately $17 billion per day of volume. For that matter, the forex is greater than all other markets, including the legal and illegal drug industry. The industry con- tinues to grow regardless of the number of new traders, fund managers, and firms that are seeking wealth or increased profits on their investments. Even with the 80 percent failure rate that most authors claim exist within the forex, the industry continues to grow every year.

It is my thought that maybe there were seeds planted long before the arrival of com- puters when trading in large quantities began appearing during the days of Solomon, as found in the number-one best-selling, most distributed book in the world, the Bible. Solomon opened many doors of trade and exchange without the influence of computers, data feeds, news announcements, political secrets, and spontaneous fundamental an- nouncements. He was able to accumulate wealth that even modern-day traders haven’t been able to match. Although Solomon had to use caravans moving very slowly to trans- port products from one geographical region to other regions, the basic trading industry

most likely grew then as it continues to grow even today. Regarding commodities, fu- tures, gold exchange, and so on, Solomon probably did more for the trading industry, especially futures in grains, cloth, corn, wheat, and other needed tangible and intangible products, than anyone will ever imagine.

As time passed and verbal exchanges became available in market facilities such as those on Wall Street, where the high volatility of the market exchange created quick prof- its that made many wealthy, the market began to grow and continues at an even higher rate. The forerunner of the New York Stock Exchange on Wall Street was founded in

1792. Traders with large amounts of funds for hedging could sustain their existence in the market with lower risk, while those with larger or smaller margins (but with less industry intelligence) gave up their trade exchanges with losses.

It was a battle of the bulls against the bears as systems, theories, and methodolo- gies began to emerge; traders began to pay fees for personalized mentorship in hopes of finding the secret grail to successful and consistent trading results. Many types of how- to systems began to develop as a result of positive trading, while poor trading results could have affected the growth of mentorship programs as well. Today, you can find (and in large quantities) numerous books, specialized software, proprietary systems, en- try procedures, forex investment counselors, trading videos, multilevel deals, and the list goes on.

Furthermore, many new branches within the industry are constantly evolving as le- gitimate systems and procedures of methodology. Often, though, you will find that men- tors and authors do not even trade and obscure their inefficient trading abilities or lack of success by running everyone else down but never proving their own personal ability as traders. They make their livings from selling systems and books; therefore, I suggest you avoid them and instead (and as I mentioned in the Introduction) find a certified mentor.

M I L L I O N - D O L L A R T I P

It is important to study only with someone who walks the talk (i.e., a certified mentor) when attempting to develop personal trading skills in the forex.

I suggest you reread the last statement, because it is true; this million-dollar tip will keep you, as a new forex trader, from making a serious mistake when you select a mentor to guide you in trading the forex.

C H A P T E R 3