TRADING IS A BUSINESS
by Joe Ross
Extract: Chapter 12, 29.7 and 39
In Trading by the Book, I described futures trading as a business. If you will be patient with me, I want to repeat here what I said there. I have a good reason.
"Trading Commodities Futures is a business. To my mind, it is the best business in the world - for a great many reasons! It has a very high profit potential against a very low overhead. Risk can be tremendously reduced by taking only high probability trades. In fact, futures trading is a relatively low-risk business when approached with the right attitude and the right planning.
"Trading is eclectic. I can pick and choose which futures to be in, I can choose when to be in it, and generally under what circumstances my entry will be. If Crude Oil traders are making money, I can make money in it too. If I want to trade the Bonds because they are moving, I can. Any trending market is making money for someone, so I can have a piece of the action, too. I can be a bull or a bear as the mood suits me. I can be a happy bull or bear if I'm going with the trend.
"I earn my living in what is probably the last vestige of true capitalism in the world - a 'free' marketplace. I can live by my wits, and reap the fruit of my labor.
"I have no customer problems: no customer relations, no customer complaints. No customer theft, no customers returning anything.
"There are no employee problems other than myself. No unions to contend with, no negotiations, no strikes. No employee benefit plans other than what I give to myself. No employees stealing from me. No collective bargaining, and no stockholders.
"There are no merchandising costs, no damaged goods, no vandalism, no service calls, no repairs to make, and no guarantees to honor.
"I don't have to advertise, and I have no marketing headaches. There is almost always a buyer if I want to sell, and almost always a seller if I want to buy. No purchasing and procurement problems, and no salesmen making mistakes.
"There are no manufacturing problems, no production schedules to meet, no shipping, no receiving, no product liability, and no insurance policies to carry.
"I don't have storage problems either. No warehouse, no spoilage, no items to discontinue or mark down. No bills of lading, no freight or freight damage, no trucks to load or to unload.
"I'm free of invoicing, accounts payable, payroll, inventories, accounts receivable, billing, dunning, bad checks, and bad debts.
"There are no salesmen who call on me, although occasionally an investment salesman will call on the telephone. As soon as I tell them I am a professional trader doing quite nicely in the market, they quickly excuse themselves and hang up. This only reinforces my perception of them as wolves waiting to tear apart some poor unsuspecting suck... whoops... prospect.
"I have no direct competition. What? How can that be? Yet it's true. I have only to deal with someone who is of a different opinion from mine. We settle our difference of opinion with money. If I'm right, then he pays up; if I'm wrong, I pay up. We resolve our difference of opinion in polite and courteous fashion, by putting our money on the line according to the rules. We don't know each other. The exchange acts as the neutral party.
"The person on the other side of my trade can't cut prices as a competitor can. He can't offer better service, he can't scoop me in the marketplace with a new innovation on an existing product or get one-up on me with an entirely new product. He can't steal my customer lists, because I don't have any. He can't lure away my best salesman either. He can't even plant a spy to discover my trade secrets, because I don't have any to hide, and because he doesn't know who I am. He can't seduce my top research scientist, and I can never be the victim of a hostile take-over. I never worry about corporate spies.
"Now I ask myself, "Self, where else can you find a business like this?" The answer is an overwhelming "Nowhere"! It's the most perfect business in the world!!"
When you decided to learn how to trade futures, you may have had some sound business reasons that were the motivation behind your desire to become a trader. ON THE OTHER HAND, you may not have! Your only reason for taking up trading futures may have been anything other than a sound business decision based upon economic reality. In all too many cases, the decision to trade futures derives from unbridled greed.
If you recognize this as being true for you, then you need to rethink the business of trading futures.
If you don't recognize this as being what motivates you, then it is time for some real self-examination. If, upon deep introspection of your motives, you find you are not motivated solely by greed, then you may have taken a giant step towards success in the markets.
Futures trading is a business. Got that? It IS a BUSINESS. It is not a game, it is not a crap-shoot, it is not a cheap roller coaster ride, unless YOU make it so.
I regularly speak with and teach successful industrialists, farmers, doctors, dentists, lawyers, brokers, engineers, accountants, consultants, and other professionals.
Many of you professionals are tremendously successful in your chosen field of endeavor. Often, you appear to be astute businessmen. You are able to turn a profitable dollar in your own business.
So why can't you do the same thing when you are trading futures?
I'll tell you why, and the answer will in many cases bend your brain. If you are one of these, listen carefully. If the shoe fits, wear it.
The ability of many of the professions to make profits is not a function of the professional, it is a function of the system. What do I mean by that?
In many of the professions you go to school, you get good grades, you do some sort of apprenticeship, you pay your dues in terms of meeting the required minimum of education, years, and/or dollars, you get licensed, and then you open up your own practice or go to work for someone else. The system then rewards you.
The system, through restrictive licensing, sees to it you don't have much direct competition. The system sees to it you get a certain amount of recognition and esteem. The system allows you to carry a title that others cannot legally have. The system allows you to impress everyone by having fancy initials after your name. The system shrouds what you do with cryptic language and terminology that only you and your colleagues can understand. The system lobbies on your behalf, so you can operate in a profitable environment. For the most part, the system works to lock in fat fees or profits for what you do.
Lavish government contracts, price regulation, set-asides, PIK programs, licensing boards, etc., lull you into thinking you know how to make money.
You fancy yourself an entrepreneur. You visualize yourself as being a successful businessperson. But in reality, you are so only because the system, set up by those who preceded you, has made it nearly impossible for you to fail once you've paid your dues.
Enter now the business of trading futures, the last bastion of true entrepreneurial capitalism in the free world. Virtually unregulated, totally out of your control, you have entered a world where there is no system to be your crutch. No system to pay you for not planting, no system to lock in a monopolistic profit, no system to set minimum or fixed prices, no system to say what is acceptable practice, no system to hold your hand in any way, shape, or form.
You have entered a world unlike the one in which you were nurtured. You, the innocent, professional lamb, have entered into the wolves' den. Believe me when I say you don't know how to operate in that world.
You have entered a world where you can't tell anyone else what to do. You can't write a prescription. You can't file a brief. You can't make an organization chart, a schematic, or a balance sheet, and you can't get any cheap help to do your nitty-gritty work. The only person to whom you can give orders is your broker, and he may be fading your bets. If he doesn't, then the guy on the floor may be doing it. You have entered a world where even your money can't help. The markets are a yawning gut, ready to devour every penny you throw at them. You have no customary fees for your efforts, no one is sitting and cooling his heels waiting for you to show up, or to finish your phone call, or to come out of a meeting or consultation. No. Now the shoe is on the other foot. It is YOU who have to wait to see if you were filled. It is YOU who have to wait to see what price you got and how much you are at risk. It is YOU who are at the mercy of the market, and YOU who have the dread of what it might end up costing you. It is YOU who sit uptight waiting for the market to bring in the verdict on your trade, to reveal to you its prognosis and analysis of your trading acumen.
You are like a beached whale frantically flailing at the air, unable to do anything to get ahead. Every time you try to get into the water, you are thrown back onto the sand. Your ego is battered and bruised. Try as you will, you cannot control the situation. The shore upon which you are stranded is like quicksand, and you are being sucked deeper and deeper into its embrace.
BC (before commodities), you succeeded in almost everything you set your hand to do. Your talents, your money, the system, or some combination thereof, have made you look good. Now comes the terrible realization you are up against something that is a lot bigger than you are. But, DO YOU KNOW WHAT? YOUR pride won't let you admit it. Surely that wonderful brain you were gifted with will bail you out. It always did before. Why not now?
You see, trading is a business, but it is a business for which you are woefully unprepared.
Not only that, but if your reasons for trading are not economic, you have a snowball's chance in a fiery furnace of becoming a consistent winner. Remember, trading is a business? How many people do you know who go into business for reasons that are not economic? Let me ask you: Why are you in the business you are in now? Are you there just for grins?
I have a question for you. If your trading is not for sound business purposes, how in the world do you expect to make money doing anything in a business in which those who are making money are ready to slit your economic throat in order to make their living in the markets?
The professionals in futures trading are there to make their living trading. They need to make lots of money so they can pay your fees. They need lots of money to pay architect fees when they build their homes.
They need money to pay for exorbitant accounting, legal, medical, and dental fees; money to pay outlandish hospitalization costs; money to pay skyrocketing automobile costs; money to pay their taxes and utilities which are too high; and money to pay interest rates which are usurious beyond belief. They need money, just as you do, to live the great and modern lifestyle.
Do they care if it's your money they get? No! When they go to you, they are at your mercy. When you come to them, you are at their mercy. Have you, as a professional, had that much compassion on them that they should be merciful to you? What do you think you are going to get in return - especially since they don't know who you are? They are probably never going to meet you. The markets are impersonal. The markets don't care about what a great and generous guy you are who gives legal aid to the poor, who devotes one day a week to running a free clinic, who provides free rent to the homeless, who works in the soup line at the church when they give out a free Thanksgiving meal to the destitute and the aged. Wake up, wake up, WAKE UP! Trading is a business, a fierce, competitive, cutthroat business. You are not in your protected, restricted, licensed market, where you can pretty much call the shots. You are on the wrong train. This is NOT the gravy train. No! When you trade, you are in the vast, relentless, overpowering, free, capitalistic market. You have no protection other than often violated ethics, and a few regulatory agencies which, for reasons with which I totally agree, want to see the least possible amount of regulation in the markets.
Allow me to quote from a now out of print book. It's called God In the Pits, Confessions of a Commodities Trader, by Mark Ritchie. Mark Ritchie has been a floor trader for many years, and has been written about in other books.
"The world of the pits is no different from any other world. It has its constant temptations to compromise. Let us say, for example, that a broker who fills orders for a group of commission houses has an out-trade with a local (an independent trader who trades only for himself) and owes him $500.
"The next morning the broker holds orders to sell 500 and buy 200 on the opening. So he sells 400 in the pit at $7.51 and buys 100 at $7.52. The remaining 100 he sells at $7.51 to the local to whom he owes the money and then buys 100 back from the same individual at $7.515. The customers' orders are all properly filled and the local makes $500 to satisfy the money owed to him on the out-trade. The ethics of this could be argued at length, but there is nothing improper about the way the orders were filled. Indeed, the customers order that was filled at 51 1/2 actually received a better fill.
"Now the broker and the local meet the next morning after discovering how easy it is to make money. Now the broker holds orders to sell 500 and buy 700. He buys only 200 at $7.54 and the opening range is established at $7.52 to $7.54. (The 'opening range' is the range of prices traded in the first few seconds after the opening bell. All opening orders must be filled within the opening range.)
"The broker still has 500 left to buy and 500 to sell. So he sells 500 to his new friend, the local trader, at $7.52 and buys 500 at $7.54. His customers orders are all filled within the allowable price range and the local trader has started off his day with a tidy $10,000 profit.
"It could be argued that the customer got what he was entitled to. But, unfortunately, sometimes he doesn't. Suppose a broker sells a large order for a customer in a falling market. He may sell 100 contracts at a number of prices. Say he sells 10 contracts at 72, 20 contracts at 70, the next tic lower, and 10 more at 68. Then he offers the market down two more tics to 64 and sells 10. He has now sold only half his order while the market has dropped 8 points-just what one would expect to happen with a big order. He may have to offer the market at 60 to sell 20 more and then sells another 10 at 56 and remaining 20 at a price of 50. The following represents what he actually did for his customer.
Sold 10 contracts @ 72
Sold 20 contracts @ 70
Sold 10 contracts @ 68
Sold 10 contracts @ 64
Sold 20 contracts @ 60
Sold 10 contracts @ 56
Sold 20 contracts @ 50
"He sold 100 contracts at an average price of 62. But the quote board shows the market trading all the way down to 50. So he sells 100 to a friend at 50 and gives that sale to the customer who never knows the difference. The 100 contract that he sold at an average price of 62, he takes into his own personal account. Then he buys 100 from his friend at 56. They have now each made 6 points on 100 (At $10 per point, a profit of $6,000). The customer, who deserved a sale at 62 but got 10 instead, lost 12 points on a hundred, $12,000. Every dime they made came directly out of the customer's pocket since he deserved to get the prices the broker took.
"(In actual fact, there is no commodity in the industry that trades in that kind of tics or has pricing structure in any way similar to what has been described here. However, I do expect to be contacted by the lawyers of a number of brokers from a variety of pits who will claim that my description is dangerously similar to their client's trading style.)
"In some pits, and on some exchanges, the little habits have grown to fairly substantial proportions. One broker told me that he had seen $70,000 change hands on one opening. And it was nothing out of the ordinary.
"He said that opportunities for an order-filler to steal were so great that he finally had to stop filling orders altogether. It was the only way he could deal with the temptation. He claimed that he knew people who would fill orders for free so they could have the opportunity to steal from their customers. Sickening!"
If you are ready to trade as a business person, with sound economic planning, organizing, controlling, directing, and delegating, then read on. If not, then you have gotten your money's worth out of this book. You're better off not trading. You're better off treating futures as something to be left alone, or as gambling, recreational fun, a way to punish yourself, a way to give back some of what you've been taking from others, penance, self-flagellation, or giving to charity - mine, to name one.
Entire books have been written about risk management. Many of the best are derived from those who write about gambling. While they are very interesting to read, they tend to be oriented towards mechanical systems.
This is all fine if that is the way you trade. If you choose to be a mechanical systems trader, then all they have to say applies to you. In my opinion, trading a system in the futures market is for the most part no different from using a system to bet the horses, or to play the blackjack table, or even to play the Lotto.
Let's face it, in the U.S.A. we have become a nation of gamblers. Everyone is looking for a way to get rich quick.
We have lost or are losing the work ethic. More and more people think that the system owes them something (I wonder where they got that idea?). For some, it is easier and more profitable to be on the dole than it is to work.
All you have to do is to walk into any food store where they sell lottery tickets to see what many of those on welfare are doing with your hard earned tax money.
Far too many of you enter the world of trading futures with the same mindset. You are looking for easy money, often a way to get rich quick. That is why you lose, lose, lose. You've never figured out that trading is a business.
However, the next best thing to running your trading as a business is to operate it as a gambling system. Systems players can and do make money in the markets. What you are doing there is removing the business acumen from trading.
All you have to do is to find a system that consistently gives a certain percentage of wins over losses, and then build a money management system around the known risk. If this is for you, then you are not a futures trader, you are a gambler. You should be reading books about gambling, odds, and probabilities.
In that event, my personal opinion is you can do a lot better with the horses than you can do with futures trading systems. My nephew, Clark Gary, makes his living at the track, and has done so since he was fifteen. He has written a book with a little help from me, called the Track Attack. In it he shows a system that can yield as high as eighty-three percent wins. That is better than any futures trading system I have ever heard about.
In the book, Clark discusses odds and probabilities in a way that makes them usable. His system has worked for fifteen years. His book is available from Ross Trading, and what he shows is totally applicable to trading with any system, even a system for trading futures.
All you need to know about risk in trading futures as a business has already been shown in this book. The problem has been that you have not really understood what risk is, or what amount of risk you truly have had on any given trade.
Perhaps I can put it into perspective for you by asking a question: If you have a $25,000 margin account, the margin for three contracts of the futures you are trading is $6,000, you are currently in the trade, your protective stop is $1500 away from your entry price, your mental stop is $200 away from your entry price, and prices are $500 above your entry price, apart from commissions and fees (these are costs), how much are you at risk?:
A. $25,000 B. $ 6,000 C. $ 1,500 D. $ 200 E. $ 500 F. All of the above. G. None of the above.
Well, I'm waiting for your answer. This is not a trick question. But the odds are overwhelming that you really don't know.
Your lack of awareness of the answer to this question is one of the primary reasons you don't make money in the markets.
If you reasoned that the answer was $25,000 because that is the size of your margin account, and ultimately you are at risk for the entire thing, you are wrong. The size of your margin account has nothing to do with risk. Margin is your operating capital. When you enter a trade, there is no guarantee that the size of your margin account is the extent of your risk. Your margin account only determines whether you can enter the trade in the first place, and at which point you will receive a margin call. You can lose far more than the amount of your margin account.
If your answer was $6,000, then you are not much better off than the person who thought it was $25,000. The amount of margin you put up has little to do with risk. You can lose more than the amount of the combined margin on all of the contracts you're in.
If you answered $1,500, then shame on you. Protective stops are rarely the amount you are at risk. Prices can leap right over your protective stop, and hand you a loss far greater than the amount of your protective stop. If you've ever been on the wrong side of a locked-limit trade, you know exactly what I'm talking about.
If you said $200, you are closer than most. Not that your risk is $200, but at least you are on the right track.
If you said $500, you are closer yet. Your risk is not $500, but your understanding is much better than average.
If you said all of the above, then you just made a very bad guess, because the answer is none of the above.
The closest answer (not a choice) to being correct you could have given would have been $700, provided you were in a position to exercise your mental stop and that there would have been no slippage from doing so.
If you were stopped out at your mental stop, apart from commissions and fees, you would have lost $700. That, and only that, was your risk. You stand to lose the $500 unrealized profits you already had in the trade plus the $200 of your own money. All this of course providing the market did not gap and give you additional slippage.
If you were not in position to exercise your mental stop, the answer would be $2000 (not a choice). The amount of your physical stop plus the amount of profit that was already in the trade. Again, this is provided you do not incur slippage.
Most of you go into a trade thinking that since you are putting up margin, that somehow you are at risk by the amount of your margin. That makes you think you have to take home a big win on every trade.
You tell yourself you are putting up $6,000, and so to make a decent profit on $6,000, you think you have to hit a home run.
You've read that futures traders make over 100% on their money. That means you have to make $12,000 on this trade. Hey, be real! That's a hard thing to do. But those are exactly the kinds of things that go on in your mind. You have these loosely put together notions of what you expect from a trade. Then you rush into the market and take a bath. As I've said numerous times throughout this book, your expectations are all wrong. Or, since you take so many baths in the market, maybe I should say your expectations are all wet.
One of the most inane things I ever heard was from a very famous investment advisor, who said that unless he could see ten times the margin he was putting up, he wouldn't even enter a trade in the futures markets.
This guy must have been some kind of magician. I have never in my life entered a trade where I could see I was going to make ten times the margin I put up. Have you ever been able to do it? If you have, please tell me what it is I'm missing.
When you see $500 of unrealized profit in a trade, you should lock in at least half of that by moving your stop ahead. That is no guarantee you will get even half, but at least you will have done the right thing.
In order to cement what I've just said, here is another question:
If you are in a one contract trade, and prices move up $100, if you move your stop up to break-even, what is your risk apart from slippage, commissions and fees?
If you said $100, then congratulations! You're a genius! You've got it now! Go out there and make plenty of money!
You no longer need to hit a home run every time you enter a trade. You no longer have to think about creaming the markets. No, now you have the understanding of how to take home regular consistent profits in the markets.
You finally understand risk! Repeat after me: "Apart from slippage, I'm at risk only for the amount of money I'm willing to lose in the markets, that includes any unrealized profits I'm willing to give up. Furthermore, I understand I do not need to make the big score on any one trade, but that the big scores will come to me as a free gift of the market on an occasional basis."
The real problem in the market is YOU. That's right! YOU are the only problem in the market that can be solved, and then, for some people, only with the greatest of personal dedication and effort.
I'll explain what I mean on the following pages. Your realization of what I am going to reveal to you will change your entire approach to markets.
Markets are not a problem to be solved. Yet, most traders and would-be traders try mightily to solve this alleged problem. They strive desperately to come up with a method, technique, or formula that will produce winning trades. They combine everything and anything possible into systems, as though there were some virtue in systematic trading that will overcome what they perceive as the problem of trading markets.
There is nothing wrong with being systematic. There is nothing wrong with developing systems that will win in the markets, even if it only wins in a single market. These are noble pursuits. However, there is not a single system or method that has ever been developed or will ever be developed that can solve the problem that is presented by trading markets.
I can prove that to you, and it will forever change your perception of the markets and enable you to concentrate on the only thing you can do to become a winner. Whether you do that thing methodically, systematically, or haphazardly may affect the degree of success you can have, but is of no consequence to the truth I'm about to show you.
Picture, if you will, a puppet on strings. Can that puppet maneuver about, reach up and grab the control bar, and manipulate itself? No, it is subject to an environment apart from anything it can control. Such is the situation of the trader. A trader is subject to an environment apart from anything he can control. The trader, by his very action, becomes a part of the market. When he is part of the market, he cannot solve the problem of the market. He is the market.
The trader's participation in the market makes him part and parcel with the market. Therefore, the trader is his own problem. The market is not a problem when the trader stands aside. It only become a problem when he/she enters into the market with a trade.
Now when I say "trader," I don't mean someone who is big enough to come into a market and manipulate and maneuver it, and make it move in a desired direction. Such an entity fits my definition of a market mover - not my definition of a trader. The thinner a market is, the more easily it can be manipulated by a market mover.
But a trader is not a market mover. A trader is an integral part of the market. The trader becomes integrated into the market at the precise moment his order hits the floor. The trader's order(s) is what makes markets move. His bid/ask causes the market to move towards him. Collectively, the market moves towards a price where most of the orders exist. Let me illustrate this for you with a real event from my own trading.
I've shown you a twenty year low in Cocoa on monthly, weekly, daily, and hourly charts. Why? Because I am the owner of that low. There may be others who sold short at that low, but my order for a ten-lot certainly helped provide the bait that caused that price to be filled. I may never know if I was the only one with a sell order at that price, but I will always wonder whether or not that low would have ever been made without my ten-lot being there.
Yet, I was properly short the market that day by virtue of the method I was using. That trade came at the end of a series of Cocoa trades in which I caught the trend most of the way down.
So you see, the problem was me, not the market, and not the method. It was I who placed the trade. When my trade went into the market, it made a low that may become the lowest low for many, many years.
The market is not a problem to be solved, yet the approach of most is to treat it as such. More than that, our educational system teaches us that there are certain ways to solve problems. We are taught two methods, but there exists a third. The third method is to simply exit the environment in which the problem exists. When you give up the idea of making your fortune as a trader, and cease all trading, you are free of trying to "solve the problem of the markets."
One method for solving problems is to change the environment. Let's say you are locked in a room with a poisonous beetle, and a spray can of insecticide. Because you are locked in the room, you cannot exit the environment and solve your problem that way. However, you can change the environment. You can grab the insecticide spray can and change the environment by making it poisonous for the beetle.
Now, let's say you grab the insecticide can and find it is out of propellant. There is still a solution for the problem. You can become part of the solution. You can crush the beetle with your hand or foot. It's a bit messier, but you will have solved the problem.
But markets do not lend themselves to the way we were taught to solve problems. As a trader, you are not big enough to change the environment in the manner that a market mover can. And you are certainly not big enough to "crush" the market with your presence.
If you quit trading, the markets are no longer a problem and you can go your merry way and not be a trader. But, if you didn't want to be a trader, you wouldn't be reading this book. So what can you do?
Learning what I'm going to tell you now was for me one of the greatest lessons I ever learned in trading. It may be the single greatest concept that ever materialized as reality in my mind.
Once I began to realize that I couldn't beat the market, that I couldn't solve what I had perceived as the single biggest obstacle I ever had to overcome, I began to understand what action I had to take in order to do well as a trader.
Understanding that I couldn't change the markets led me to the only possible solution available. I had to change myself! I couldn't change the environment, I couldn't change the market, I couldn't be a part of the solution. All I could change was me. I could never be a part of the solution, because I was a part of the problem. I had to change my behavior relative to the market. I had to learn to enter a market and stay with that market as long as possible.
It was similar to being a rodeo cowboy. It was like riding a Brahman bull. Once you get on that bull and they open the gate for that bull to enter the ring, you have to stay on for eight seconds. If you can do that, you may win.
In the markets, you have to stay on long enough to cover costs, perhaps eight ticks. If you can do that, you may win. But until you at least cover costs, you have no chance of winning.
For me, trading became a contest of trying to time my entries in such a way that I could get in rhythm with a market for at least a period of time sufficient to cover my costs. But then, unlike the Brahman rider, the longer I could stay on, the more points I could make. Every trade, then, started out as a short term trade. Stay in the market and ride that market long enough to cover costs. After that, whatever the market was willing to give I would gratefully accept. It meant that sometimes the ride was only minutes long. At other times the ride could last for months. Not because of any great talent or skill of my own. Not because I had managed to tame that market. But rather because I had caught the market rhythm by being in the right place at the right time, and the market had allowed me to go along for the ride when it collectively decided to set out on a longer journey than usual.
That's how my trading life has been. In all the years I've traded I've caught exactly three large moves in the market. I learned to make my living from the everyday trading that takes place. I quit looking for the "BIG" move. Some of those come once every twenty years or so. I had to change my behavior so I could run a profitable trading business in the environment of what normally takes place in the markets.
With the realization of this great truth, the entire picture changed. The market was no longer something I had to overcome. I had only to overcome myself. The market was not the enemy, the enemy was my lack of discipline. Pogo said, "We have seen the enemy, and it's us." I believe that with all my heart. The market was my friend. It was the environment in which I had chosen to earn my livelihood. All I had to do was to cooperate. I learned to bide my time and wait for my opportunities. I learned to find those situations which suited my temperament, my pocketbook, and my trading style. That's when I did my best. I used my Life Index to make sure I was trading when at my best. I learned to trade when I was right and the market was right. We both had to be right for each other. When we were, the money came. When we weren't, I learned to get out in a hurry. Getting out in a hurry kept my losses small. Staying in as long as possible whenever I could, kept my winnings large in proportion to my losses.
The only solution to trading markets is to change yourself. You cannot solve the problem of the markets any more than a puppet can manipulate its own strings. The sooner you realize this truth, the sooner you will succeed as a trader. When you win, it will not be because of some brilliant thing you did. It will not be attributable to your superior mind or intellect, or your great ability as a trader. Instead, it will be because you have learned the greatest lesson any trader could ever learn-you will have learned to discipline yourself. You will have changed your attitude and your behavior relative to the markets. You will have at last become a trader.