From Dreams of Profit to the Battlefield

Sep 27

6 min read

What lies behind every Buy and Sell button?

Ali Mirzaei | My Perspective on Trading

Clicking Buy or Sell takes seconds. The knowledge that should underpin that decision takes much longer to build.

This is where my concern begins. In parts of trading education, the gap between becoming familiar with a method and being able to use it with real money is overlooked. Headlines such as “Trading in One Minute” or “Build a Strategy in Five Minutes” attract attention. But what picture of this profession do they give the audience?

Five minutes can be enough to explain a point, introduce a tool or show a trade. My question is whether viewers then understand why they should enter, when they should stay out and how to protect their capital if they are wrong.

Watching surgery does not make you a surgeon

A short video can show the stages of an appendectomy. Watching it does not make someone a surgeon. Behind the operation are education, practice and the ability to recognise unexpected conditions. Knowing the sequence of steps is not the same as being able to carry them out properly.

The same gap exists in trading. The ease of buying and selling should not mislead us about the difficulty of the decision.

Behind every Buy and Sell button, there should be knowledge we can explain, question and take responsibility for.

When understanding is set aside and only the hope of a quick profit remains, our decisions can become gambling-like, even if our charts are covered in tools and terminology.

One person’s profit does not prove a strategy

Someone says: “This method works. I have made money with it. You should do it too.”

Before accepting that claim, I have questions. In which market? Over what period? With how much risk? Across how many trades? Where are the losses? Under what conditions has the method performed poorly?

If we see only successful trades, we do not have the full picture. A few profitable trades alone do not establish lasting skill. Equally, a few consecutive losses do not, by themselves, invalidate a method. We need to examine the rules, their execution and the results across a series of trades.

People’s circumstances also differ. Time, capital, experience and the ability to tolerate losses vary. A method that one person can execute consistently may not suit another.

A simple strategy is not the same as incomplete teaching

Sometimes the entire lesson amounts to: “Find the trend, identify the highs and lows, buy here and sell there.”

That may begin an explanation, but it does not complete it. We still need to know:

What condition is the market in, and which conditions was the method designed for?
What permits an entry, and what rules it out?
What would invalidate the trade scenario?
What are the position size, risk and exit rule?
How will the method’s results be assessed?

Not every strategy needs every indicator and pattern. What matters is knowing what the decision rests on, and why.

A strategy’s simplicity is not the problem. Leaving out its reasoning and conditions of use is.

A method can have simple rules and still be the product of careful investigation. The problem begins when we confuse a simple explanation with having no need for knowledge.

Understand tools before passing judgment on them

One person says “RSI is good”; another says “RSI is bad”. Without explaining the purpose and conditions of use, what do those statements teach anyone?

Before accepting or rejecting a tool, we should understand what it measures and where its limitations lie. Fidelity’s RSI guide, for example, explains that the indicator can remain overbought or oversold for extended periods during strong trends. Reaching those zones alone therefore should not be treated as a definitive trading instruction. Source: Fidelity’s RSI guide

That explanation is more useful than a “good” or “bad” label because it shows where we need to be careful with our interpretation.

I expect the same when discussing Fibonacci, price action or any other approach. If someone says “Fibonacci is gambling”, they should identify the application they are criticising and the evidence behind the criticism. If I say that price action alone does not constitute a complete trading plan, I should define what I mean and show which part of the plan is missing.

A tool’s age or its creator’s reputation does not prove that it always works. Our disagreement does not invalidate it either. Both sides need reasons.

Our reason to enter on one chart, our fear-driven exit on another

Understanding the relationship between trends and time horizons is especially important in my approach.

We may see an upward move on a five-minute chart while the same move is a correction within a daily downtrend. These views need not contradict each other: we are observing one market at two scales.

Imagine entering a stock on the basis of an analysis expected to unfold over several weeks, then exiting at the first red candle on a five-minute chart, even though the planned exit condition has not occurred. The analysis horizon and execution criteria have become disconnected. Conversely, if the exit condition has occurred, staying in the trade and hoping for a recovery should not be called analytical patience.

This is why I emphasise looking at higher timeframes for context. We need to know which move we are trading and what would validate or invalidate our decision within the chosen horizon.

I have no objection to short-term trading in itself. My concern is choosing it solely to extract money from the market faster.

A shorter trade does not necessarily mean a shorter learning journey.

Trading can be learned; no trade’s outcome is certain

I am not saying that becoming a trader requires university or a particular qualification. I mean structured learning: study, practice, recording decisions and revisiting mistakes.

The story of the Turtle Traders also concerns whether trading can be taught. Richard Dennis and William Eckhardt turned their disagreement about training and individual characteristics into a practical experiment. My takeaway is to take the possibility of education seriously, rather than promise success to everyone who learns a few rules. Source: Michael Covel’s account of the Turtle experiment

Even a highly trained trader makes mistakes. Statistics and calculation help us evaluate a method and its risks, but do not make future prices certain.

Learning is therefore more than collecting information. We must be able to revise our understanding in response to results and new evidence.

A strategy must fit our circumstances

Before recommending a method, we should ask how much time someone has, what capital they are working with, what losses they can bear and how they make decisions under pressure. Are they looking to invest or trade actively? How realistic are their income expectations?

But matching a strategy to personality does not mean endorsing all our habits. Someone’s impatience is not a sufficient reason to recommend fast trading. That impatience may be a weakness they need to work on.

A suitable method should be practical for the person’s circumstances while allowing them to recognise and address their weaknesses.

Teachers must answer for the reasoning behind their lessons

Failing as a trader does not automatically disqualify someone from teaching. Failure can be valuable if it is examined and understood. The question is whether the person has recognised their mistakes or merely moved from trader to teacher.

Profitability alone does not establish teaching ability either. A teacher should be able to explain a method’s reasoning, limitations, failure conditions and means of evaluation.

That standard applies to me too. You should be able to challenge what I say. I may be persuaded, you may be persuaded, or we may disagree. But when the reasons are clear, the audience has an opportunity to think more carefully.

My purpose is not to frighten anyone away from trading. I want us to understand what we are doing and what responsibility we accept before putting our capital into the market.

Good education should enable us to explain why we are entering, what risk we accept, what would change our view and when we should exit.

And if we intend to teach others, we need not only the ability to explain but the courage to say “I don’t know”, accept criticism and correct our mistakes.