Words to Live By? (Part 7)

Today I will wrap up my analysis of some apparently sage advice recently offered by an option trader.

Continuing from part 6:

“On this trade, I think it’s important to really understand how [the market] works so you can see the graph and see how these candles affect the trade.”

How the market works?  A strong bullish (bearish) candle means positive (negative) PnL for a long (short) trade–is that what he means?  This tells me absolutely nothing new.  “Master of the obvious” comes to mind.

“You’ll see patterns among the stocks.”

Will those patterns be evident at the hard right edge of the chart where all live trading occurs or only in retrospect?  Patterns are always evident in retrospect but not a single person has ever taken a dollar from the markets by trading this way [backtesting].  Making this claim implies the patterns are available at the hard right edge but it would require an extensive research effort to validate that claim.  From what I have seen in the markets thus far, I wouldn’t believe it for a second.

In this blog series we studied a clip of stock market wisdom that sounded natural, good, and useful.  All it took was some old-fashioned thinking in order to realize what initially seemed bright and shiny was more akin to coal in a holiday stocking.

In the world of trading, there are a lot of teachers and business people willing to tell you how to make consistent profits.  Before you pay anything for such “sage advice,” though, I strongly encourage you to get a free sample and subject it to the rigors of critical thinking.  This can provide a sneak peek into whether any of it has any merit at all.