March 29, 2008
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The Trading Sharingan
Ask most folks who have dared to venture into trading stocks or some other investment or commodity as a means for building ones wealth to name a main trading desire, and it will most likely be to develop a system that will help them maximize their returns and minimize their losses.
A trader without some type of system is a trader that’s virtually blind and will most likely lose money. It’s the same as traveling to a foreign place you’ve never been to with no directions or planning. It may work out, or it may not with odds favoring unexpected complications.
That’s not to say that traders using a system are guaranteed to make money, but rather by at least having a plan established, their odds are better than the person who has none.
Whether or not a traders system will result in that person making money will depend on the both quality of the system as well as the ability of the trader to accurately follow it.
In an ideal situation, the system would give one precise information of the best time to be in the market just before it takes off, and also the best time to sell before the market tanks. The “Holy Grail” of all traders is to develop a system and tweak it to achieve that level of perfection, or as I call it, the Trading Sharingan.
While some people may be naturally gifted with this ability, I believe it can also be developed through constant training and learning. Achieving this level however, will be no easy task as it combines establishing a higher insight into market behavior with a system of trading that works best for that individual. I don’t believe a mechanical/automatic system exists that will make money for all who use it, although many novice and intermediate traders may think otherwise. This is why there are numerous “sure fire systems” on sale for hundreds if not thousands of dollars in the market. Straight logic should tell would be believers that if any system was as “sure fire” as advertised, the seller wouldn’t put it on the market and would be using it instead to make all the money they want. The systems advertised may work, but only in the hands of a skilled individual. The human element will always be needed to master the market since that’s what the market is comprised of. No purely mechanical system will work for long as the market is constantly changing and one must adapt with it.
Not adapting to changing conditions can have disastrous results such as what has happened to financial firms like Countrywide, New Century, and Bear Stearns to name a few.
Note that the Trading Sharingan isn’t needed for just regular investors.
Using dollar cost averaging into target or index funds should be OK for
the long term although they still need to monitor their investments at
least every 6 months to a year to make sure their funds are performing
on par with the others.Actively trading increases your risk and exposure in the market with the understanding of the potential of receiving a greater rate of return. For these type of traders who understand the risks and are willing to put their money on the line anyway, developing and honing a Trading Sharingan is the key to being successful.
A person who can achieve this will have a significant market advantage as they are going against other traders/investors basing their decisions on less accurate means- similar to being one of the few folks equipped with night vision in a dark room. This person will see future market behavior and act accordingly before it becomes obvious to everyone else and may be seen as “predicting” market behavior.
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