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Analyst or Trader? – My personal journey

We always welcome feedback from clients and free trialists here at FuturesTechs, so we can strive to provide the best possible service to aid your trading decisions.

I thought I’d use the Blog to answer publicly a few questions we have been asked of late, so here goes with one:

Dear Clive,

Re buying Technical Analysis, I always find myself thinking the same question: “If it were that easy/obvious……’we’ve been bullish almost right from the start of the recovery’……….’gearing up for a sell-off’…… why do analysts like yourself not just make loads of money trading futures or spreadbetting?

If I found it that easy/made so much money I wouldn’t bother selling my levels…

Regards,

RJ

This is a question I’m often asked, especially at Seminars. People are, quite rightly, confused that I appear to be so well equipped to trade the markets, yet I don’t.

I think there are several reasons why I don’t trade, so let’s try and go through a couple.

1. It could be argued that YOU wouldn’t want me trading, because then I would be skewing my comments and ideas around my own position. If the market was clearly going down but I’d been caught with a long position I might be trying to talk it up, convinced that my position was right, and the market was wrong. The problem with this is that the market’s never wrong! But I am a human being, so I am subject to emotions just like you, and fear of cutting a wrong or losing position is one of the most powerful (negative) emotions in trading. The flip side to this argument is also pretty valid, though. The idea that an analyst should be able to trade their views put their money where their mouth is has merit, sure. The problem I’ve found with this is that good analysts generally don’t make good traders. I’ll come back to this notion in point 4.

2. I don’t have time. I run a growing company that’s trying to reach out to all sorts of traders, through seminars, increasing product breadth, and finding new delivery methods to take the product to a wider audience. Not only that but the day-to-day analysis takes a good chunk of time each day as well, starting nice and early at 5.30am each morning (although I’m not on my own, it must be said!). So I don’t feel I have the proper amount of time to devote to trading. I don’t think this is something you can do properly with 20 minutes work a day, and if you believe in those ads that tell you this then maybe you should think about the old “if it sounds too good to be true, then it probably is” rule.

3. I haven’t made (consistent) money before as a trader. I have had a go at trading a few times. In 2001 I worked in a Trading Room in the City for a year. It was a “Prop” room with a bunch of short term traders doing “high frequency” trading. These guys were happy to make a tick on a trade, and did at least 50 trades a day. Whenever I had a position on in the Bund Futures that was more than 5 ticks onside the rest of the guys couldn’t believe I was still in the trade. I wanted to run it for another 10 or 20 ticks, but found myself taking the smaller profit. In other words I allowed what was going on around me to affect my trading decisions – Bad mistake. The other problem was that my trading was fitted around writing the analysis. I would write the analysis from 5.30am to 8am, then trade until 10.30am, the write the analysis from 10.30am ‘til midday, then start trading again. – Oh dear! The result? I broke even, so lost money over the course of a year, when taking into account expenses like the cost of the desk and the professional trading software.

Then in 2005 I put some money into an account to have a go at trading UK Equity CFDs, all the while continuing with my daily analysis, as well as providing stock tips for a CFD firm. I lost most of my stake because I was long of a bunch of stocks one week in a nasty bear move, when my FuturesTechs FTSE report was as bearish as it could be… So I was bearish in my view, but bullish in my positions. Pretty dumb, huh?!

I closed this account down, deciding that trading wasn’t for me, which brings me on to my final point, because so far, re-reading what I’ve wrote, it sounds like a bunch of lame excuses. There is a much more important reason why I’m not a trader.

The main reason I don’t trade?

4. I don’t enjoy it, or maybe I’m just not cut out for it. I am an emotionally highly charged person. I am extremely passionate about what I do. I am also extremely self-critical. I hate it when I get the market wrong when I’m writing about them, and I’m 10 times worse when I’m trading. I turn into a total pain in the butt, and my wife likes me even less than usual! During the two stints when I was trading I found my mood swings to be unpredictable, I found my home life was affected; snapping at the kids, and finding a quiet corner of the house to have a sulk when my P&L wasn’t going the way I wanted to. I don’t like being this person. While I care passionately about the markets, about Technical Analysis, and the FuturesTechs product, I don’t wish to jeopardise things that are far more important.

So my own personal journey of discovery has led me to make the firm decision that trading’s not for me, and that I am far better cut out to analyse the markets, and continue to aid real traders (who can manage their emotions!!) to trade the markets using Technical Analysis, one of the most powerful tools available to anyone who wishes to make a success of trading.

I’m happy to admit that I’m not a good trader then, which is possibly why I’m doing okay as an analyst, because there is a school of thought that a good trader will never be a good analyst, and vice-versa, just because we’re all “wired up” differently.

Next time I’m going to talk about some more technical stuff; we’ve had a few questions from readers about gaps, and how to trade them.

In the meantime if you are a FuturesTechs member and have any questions that you think would be suitable for a “public” answer then feel free to ask away!! (Click here).

If you wish to have a look at our service please click here to request a free trial.

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