Knowledge vs. Skill – Understand the Distinction Between Information and Functional Skill:
I fear that many hopeful traders become serial course-takers and service-subscribers (related to trading) due to a misunderstanding in what it takes to achieve durable success in the markets. They just don’t understand the difference between knowledge and skill.
Now, I’m not saying that all trading courses and services are bad – that’s not true at all. But what I am saying is that there’s a limit to how helpful they can be. Because at some point, the knowledge you acquire in a course or service has to be practically applied.
Simply reading a couple books or watching a few YouTube videos isn’t enough to turn you into a consistently profitable trader. Any information or knowledge that you obtain is all just theory. In other words, you have to do more in order to wire functional skills.
It’s the same as playing an instrument or sport. Simply watching a video of a professional musician playing a flawless trumpet piece or a professional athlete hitting a baseball over 4oo feet into the stands won’t magically make you be able to do these things.
Even if these professionals broke down their approach into steps and provided you with pointers, you still have put in the time and effort to turn that knowledge/information into skills. This can only be accomplished through deliberate practice and training.
Where Most Traders Go Wrong – Thinking They Can Arrive at Trading Success Intellectually:
Trading success is not necessarily about how smart or intelligent you are – it’s about executing on a statistical edge with discipline and consistency. This is why being a great market analyst doesn’t necessarily equate to being a great trader.
You can know all there is to know about technical and fundamental analysis, but if you can’t appropriately manage risk then none of that knowledge really matters. Eventually you’ll decimate your account by removing stops, adding to losers, and going against your plans.
This is where consistently profitable traders separate themselves from the pack. Not only do they understand technical/fundamental analysis, risk/money management, and trading mindset/psychology on a conceptual level – but a functional level as well.
It’s one thing to understand the importance of your rules and plans outside of market hours. But it’s a completely different story following them in-the-moment while the market is constantly shifting around – in many cases against your current position(s).
The bottom line is that successful traders have a sufficient level of knowledge in relation to trading terminology and concepts. But their success is a result of much more than that – it’s the development of legitimate technical, analytical, and mental skills.
Acquiring Both Knowledge AND Skill is the Benefit of a High-Quality Trading Course/Program:
I hear the argument all the time in relation to trading courses/programs that: “you can find all of the same information from the course for free online.” But again, you have to understand that information alone isn’t the determining factor in success.
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You can find pretty much any information you want for free these days through Google and YouTube. It might take a little more digging and sifting through multiple sources (a course can provide more organization/structure), but free information is available.
The problem with this free approach is that you don’t necessarily know if the information is accurate, and it also lacks individual coaching/mentorship – which offers the benefit of fast, personalized feedback for accelerated skill-building and improvement.
I do agree that there are many low-quality trading courses out there that don’t teach much more than basic technical analysis or offer any sort of 1-on-1 mentorship opportunities – I’m not arguing that. But there are still a handful of solid programs out there.
The bottom line is that no course or program (at least in my experience) offers any sort of magical information/knowledge – like the foolproof/holy-grail systems that people are always chasing. The real key to trading success is in experience and skill-building.
Good Trading is a Skill-Based, Peak-Performance Endeavor – It’s Not Gambling:
Many market participants treat trading like gambling – acting randomly/irrationally based on emotions/impulses. But that’s not what good trading is all about. Good trading is about thinking probabilistically, having a long-term focus, and executing with consistency.
If you take a casino, for example, the typical casino patron does not have the odds in their favor. Every single game (slots, roulette, etc.) is rigged in favor of the casino. It might seem like a slight/unnoticeable edge, but the casino isn’t really gambling at all.
Sure, a handful of patrons will walk away with winnings sometimes. But in the aggregate – the more rolls, spins, and hands that are played – the more the casino makes. This is why there are table limits and the common motto is “keep the players playing.”
When it comes to trading, you want to be like the casino (not the patrons). There’s certainly short-term risk due to variance (losses are unavoidable), but you win in the long-run if you continuously put the odds in your favor and appropriately manage risk.
At the end of the day, you need more than information to achieve durable success – you also need the functional skills to execute.
Learn More in the Trading Success Framework Course
Written by Matt Thomas (@MattThomasTP)
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