Trying to develop skills in a new field, people often think in analogies. Analogy can be used, to combine new information with old information. By analogy, a conclusion is made, what, if two or more things are similar in some way, they will be similar in other respects. There is a very human tendency to use previously learned skills when teaching new ones.. Easier to understand a new topic, if it can be associated with the already studied. This is especially true in trading.. Trading in the Markets – difficult task, and it is easier to master, if we link it with familiar topics: that is, we can more easily understand Trading, thinking by analogies.
We present many analogies for trading: Trading is like a sport; technical analysis – art; traders – intuitive scientists, or trading is like surfing. Thinking in analogies helps you understand trading, but it's important to remember, that this method is only used as a guide. Don't confuse analogies with real facts., which you are trying to understand. Trading may look like some kind of activity, but she is very different. Let's take a look at some common trading analogies and evaluate, what are their similarities and differences.
Science: Scientist develops hypotheses about the general laws of nature, collects data and tests the validity of these hypotheses. Traders also develop hypotheses about markets. They try to measure market sentiment, predict, what will the market do, and test their hypotheses in transactions, watching that, what's happening. But scientists are doing research, to find basic laws, which are repeated. Scientists tried to study the markets, but with little success. Unfortunately, markets are too random and chaotic. It's important to remember this. Markets are not as predictable, as science requires, so don't pretend, that many accurate predictions can be made. Don't fight for predictability. Accept, that markets are unpredictable.
Sport: Trading is a lot like sports. Professional athletes are rewarded for, that they have developed their abilities extremely well. Trading also requires well-developed skills.. Trader is exercising, getting ready “play” on the market, when he sees the opportunity. Trading is much like sports, but it requires knowledge of trading methods. And the markets are a little less predictable, compared to that, what the other team or the enemy might have done.
Artist: Art is often hard to understand. Have you ever seen contemporary art? It's hard to see that, what makes it art. But it is. All this – a matter of context. Observing chart patterns, which indicate the possibility of trading – art. By evaluating the graph in the right context, you can see and feel the pattern., which can lead to large rewards. But trading – not exactly art. It is useful to have an artistic streak, but traders must be accurate in their interpretations of the market, or they won't make a profit.
Businessman: Lots of traders talk about the need to consider trading, as a business. Businessmen are very punctual, when it comes to planning, equipment, or selling goods. But they usually have either a good idea or something, what the public needs. Supply and demand in the market is a little more complex. Sometimes the fundamental forces of supply and demand have little to do with price movements, it is important to remember this in trading.
Analogies can be helpful when trying to understand trading, but remember, analogy – just an analogy. Trading can seem like an activity, which you already understand, but it can also be very different.
