The Mindset That Splits The Pack

Having spent much of March in the UK for vacation time, I got plenty of time to recharge, catch up with friends and family and meet a few new people along the way. I very rarely talk about my work, but sometimes people take an interest when meeting for the first time and, of course, they like to ask me what I do. As expected, when you tell people that you are a trader, plenty of questions tend to follow. It always seems to be more fascinating to everyone else than it does to me; I suppose maybe because I have been involved with the markets for around 15 years and my normal is probably different than most.

A conversation I had with one gentleman is what prompted me to write this article. When we got taking about what I do and what I teach, he revealed to me that he also liked to speculate in the currency markets from time to time. As the chat went on he revealed that he had actually been trading FX for about five years. He was very open with me and we discussed how he had made some decent money out of it but in the end he was still in the negative since he had started. Asking him how he felt about that, he replied by saying that he was close to giving up because he felt that all financial markets are rigged and manipulated and that, ‘the big boys are all out to get you’.  I asked him why he didn’t just quit then if he felt like that, his response being that he just needed to find the big secret to it all and that maybe I was the guy to help him. Recognizing his pain, I felt it was time to reveal to him the big secret to the markets. He held his breath in anticipation.

‘The big secret to it all is that there really is not a secret,’ I said to him. Money is made and money is lost by every single person and institution who speculates. We all win and we all lose, but what truly separates the profitable from the unprofitable is how you win and how you lose. Lose very small and win big and you won’t need to be right that often. Nobody gets it right all the time and if they did, the markets would eventually cease to exist as it would no longer be a zero-sum game. After all, there must be a winner for every loser, right? This all seemed to make sense to him, but he still asked me what he was missing, as the idea that the markets were manipulated daily was dogging him and he couldn’t get away from it.