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With Only One Setup you can still Win


The Story about Only one Move

Sometimes your biggest weakness can become your greatest strength.

There was a 10 year old boy, who's left arm was damaged and subsequently amputated. He decided to learn judo. His Sensai (teacher) was an old Chinese judo expert.

The boy learned quickly. After three months, he had learned only one move. He asked his teacher to teach him more moves. The Sensai told him that this was all he would need.

Soon after, the boy entered a tournament, where he quickly advanced to the finals, where his opponent was bigger and more experienced. The boy seemed very out matched. After a long match, the opponent seemed to lose concentration. Quickly, the boy took advantage and pinned what seemed to be his superior opponent.

On the ride home, the boy asked his Sensai. "How could I win with only one move? "The Sensai replied, "You have nearly mastered one of the most difficult moves in all of judo. And, the only defense against that move, is for your opponent to grab your left arm."

Sometimes your biggest weakness can become your greatest strength.
What does this teach us as traders?

This tells us that we may have abilities from previous occupations or experiences that we can apply to trading. What did you do before you became a trader and what in particular did you excel at? What part of your previous job/sport/vocation/profession/occupation were you better at than anybody else? How can you use this skill to become a better trader?

Chances are that you're not a rocket scientist. Not many people are. So you can chuck the heavy quant theory out the window because you know that you aren't going to master that and be able to back test the markets using complex mathematical models.

Start off by learning one particular setup for your trading and learn it well. Be able to identify it immediately and know where you will put your stop and targets. Practise this setup until it becomes second nature and you don't have to think about it - you'll know exactly what to do when you see it.

Now learn a new setup, a second one. Practise this one as well until you know exactly what you're doing and add this one to your arsenal.

And now more on to the next one...

How long will this take? Learning each setup will take time - the amount of time depends on how quickly you learn and how you go about learning. If you learn in real time by watching the markets and the setup that you are learning happens once a week then it's going to take you a very long time to learn this setup. If, however, your charting software allows you to playback historical charts for you to practise on then you might be able to squish 52 weeks of market watching into a high speed afternoon. After you've seen the setup 52 times you may know it by heart.

So how does learning and knowing a setup so well help us?

Well master traders are master traders because they assimilate so much market information at the same time that they can instinctively know where the market is heading. This instinct isn't really a 6th sense. It is their subconscious processing hundreds of setups that they've seen before and know by heart. They probably have 10, 15, 20 years of experience and practise to get to that point. Your job is to catch-up to them in a very short period of time to be able to compete with them. The only way that you can do that is by learning by rote all the setups and not having to think about them. Spending time thinking about and working out a setup in real time means that (1) you'll be slow on the trigger when it comes to execute the trade and (2) you won't have any time or brain power (bandwidth) to process other (possibly counter trade) set-ups that are happening at the same time.

Think about it - it makes sense.