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MENTORING - Fundamentals - Introduction - Coggle Diagram
MENTORING - Fundamentals - Introduction
Trading is a search problem.
Every player in the market is searching for a opportunity. An opportunity to make money through buying and selling of something (securities or contracts).
Buyers are searching for sellers while sellers are searching for buyers. Search is a basic human problem.
This is how an ecosystem is made of on the earth.
Resources are always limited. So they are gotten by only people who are surviving.
Trading is an economic system. Where agents (players, means buyers or sellers) are constantly searching for opportunities to make money.
Trading is an economic system but a sociological problem. Resources are always limited. That means opportunities are always limited.
The search problem is entirely based on effective decision making.
The search in trading is always uncertain. Like in every part of life.
Decision making is always uncertain and hence it is always probabilistic. That means a decision is always uncertain.
Certainty does not exist in trading or in financial markets.
You bring certainty in decision making by collecting more data that supports your certainty.
In trading the search is always uncertain. Because there are no barriers to entry into the market at any given moment.
Traders or investors are always trying to find opportunities. They are trying to find the opposite parties. Buyers are searching for sellers and sellers are searching for buyers.
This search problem is magnified by the uncertain entry of people at any point in time.
A system where there are no rules or if rules can be broken easily is called a complex adaptive system.
To beat a complex adaptive system, all you need to know is a way to survive.
To survive a system means avoiding risk.
You should avoid unknown unknowns. These are similar to blind spots in driving.
We should be constantly worried about risk. We will focus on risk with hard data in our hands. We will take a trade only when data is telling us to do so. Else we stay away.
In this complex system, we need an anchor to survive. To avoid risk I want to ensure that I am playing against the right people and with right people.
We should follow people who are stalwarts in trading. Here our stalwarts are our real money.
Why they are our anchor to follow. Because they avoid risk. They just hate risk to the core.
They avoid bad companies, of which stocks are to be traded. They avoid bad stocks also. Most importantly, they avoid a bad market. They avoid portfolio risk. They avoid country risk. They avoid every risk that can come.
Avoid risk, survive, find an anchor and then start finding trades.
The methods of real money gives you the conviction to trade or not trade a trade.
Real money avoids liquidity risk. That means they will never do business in an illiquid market with illiquid players.