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Therefore the market is always moving, always changing. It has no defined structure and offers high profit and loss opportunities. In a fraction of a second markets can go from apparent quietness and stability to extreme speed and turbulence. This specific market characteristic is often ignored or underestimated by traders. But having to cope with a completely unstructured, fluid and ever changing environment is not something that we are used to. It’s like being projected into a world without laws, similar to the motion of atoms in a quantum mechanics system.

Let’s take for example, a very simple activity such as sitting down. In a world regulated by quantum mechanics rules, this simple action could become extremely complicated and risky, for anyone used to living in our “normal” world. What would happen if I sat down? Sometimes the chair would remain in the same position, both in terms of space and time. Sometimes the chair would disappear and
reappear in another place at an unexpected time. So the simple action of sitting down, could actually become very difficult if I continued to refer to my usual model of thought. So to be able to sit down in a world regulated by quantum mechanics, I’d have to learn a completely different way of thinking and acting. Otherwise, I’d be very inefficient.

As human beings, one of our main purposes is to create mental structures for ourselves which will bring us security and stability. And this is the main problem that traders have when confronting the financial markets.

We are not used to interacting
with an environment which is mainly ruled by change and uncertainty. An environment where the mental and decisional processes of all market participants are constantly changing.

Traders’ search for the Holy Grail- in other words the indicator or the theory which will systematically forecast market movements - is actually only an attempt to eliminate constant market uncertainty.

Therefore the first fundamental rule of the market is to accept changes and market uncertainties (in other words accept RISK). There is no other way to survive the financial markets than to accept this obvious rule. And it is a fundamental rule precisely because it is obvious. Easy to understand from a theoretical point of view, much more difficult to put into practice.

Accepting change and uncertainty doesn’t mean having a confused or insecure mind-set and attitude. On the contrary, understanding that fluctuations depend on mental processes and decisions, which can vary depending on an infinite number of unpredictable factors, allows us to eliminate all the mental mechanisms which generate pain (these will be developed in subsequent articles).

The absence of pain changes our perception and gives us the possibility to be objective and rational. Objective perception is fundamental in trading, as traders have to recognize market patterns. Therefore, a rational and objective mind set will help us develop a rational decision making model, which is not based on emotions. Acknowledging the fact that markets are unpredictable and accepting trading risk is - according to me - what makes the difference between a successful and unsuccessful trader.

This state of mind is an ability (or SKILL) which any trader should reach before he/she can start becoming profitable constantly and in the long run.

Rodolfo Festa Bianchet
CEO and Founder
Trade Interceptor

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