Knowledge

Knowledge

One of the most fascinating books that I have ever read was that of the life of Jesse Livermore. He started to work in a stock brockerage at the age of 14 at the beginning of the 20th century. He had an incredibly good memory and as the financial figures came into the brockerage over the ticker tape, he would remember them and note patterns. After 6 months of doing this, the data became easy to understand and the result was that making money on leveraged dealings became second nature to him. As a young teenager he started trading and he became so successful that he was unofficially banned in any brockerage in America that knew him!

This story shows us the kind of qualities needed in currency trading. We have already investigated intelligence and now we shall look at knowledge. It is not good enough just to be intelligent for currency trading. Jesse Livermore did not know it, but when he went to that brockerage to work, he was actually getting an education in his most formative years. Anybody who is going to profit from currency trading needs to go through the same education. It is about studying the graphs, living them, following their every movement.

I have heard stories of traders who don´t have a method, they just work on instinct and even though the stories are probably all false, yet I believe that they can be true. A method is a systematic framework created to take advantage of statistically probable events in the figures. Living the graphs means that you absorb consciously and unconsciously details of the data which is very similar to having a method. It is the difference between learning French and living in France. Anybody can read a book about currency trading, but to follow the graphs on a daily basis creates an instinct based upon living in that world that significantly improves the trading experience. Knowledge builds the foundation and intelligence takes that knowledge and formulates it into workable knowledge that leads to earning money.

The danger in this game is that a person sees the potential for profit, rushes in and hits a brick wall and then cowers away into the shadows. People too quickly connect currency trading with earning money and then start thinking about leaving their job and going into this full time. It took me about 4 months to find a system that I was reasonably satisfied with that earnt me pips. I have heard figures of 3-4 months being passed around by others and so probably this is should be considered the minimum time period that a person thould think about spending learning before actually trading.

Bibliography
Edwin Lefèvre, ´Reminiscences of a Stock Operator´, A Marketplace Book.