The legendary World War One fighter ace Baron Manfred Von Richtofen was asked before his death what the job of a fighter pilot was. It is reputed that Richtofen replied, “The job of a fighter pilot is to find his enemy and kill him, all else is superfluous”. Initially, it would seem that the comparison between a long dead pilot and trading is somewhat irrelevant particularly when it is considered that war-like analogies have been known to impend trader performance. But look a little deeper at the tone of what is being said; Richtofen is giving a prescription of how to deal with a very stressful high-performance activity. Trading is a stressful high performance job that is full of distractions, most notable of these distractions is the very technology that was supposed to make trading easier.
As technology has advanced it has enabled the trader to test a myriad of ideas, to backtest and curve fit until their screens are a swirling mass of incomprehensible data. This massive analytical endevour aims to find the Holy Grail, that one indicator or pattern that will guarantee us endless risk-free profits. The phrase Holy Grail has entered the lexicon of traders without traders being aware of how truly significant the phrase is to trading.
The legend of the grail makes its first appearance in written form in about the 12th century. Christian mythology states that the grail was a vessel Christ drank from at the Last Supper; the grail was then brought to Britain by Joseph of Arimathea, where it lay hidden for centuries. The search for the Grail became the principal quest of the Knights of the Round Table; it was thought that the Grail was guarded by a custodian known as the Fisher King. King Arthur believed that finding the Grail would cure Camelot of its ills and restore its glory.
King Arthur sent his knights on a quest for the grail so as to reinvigorate Camelot which at the time according to legend was besieged by external enemies and internal dissention. Arthur believed that should the knights find the grail Camelot would be restored. Arthur thought finding the grail would fix these problems. The meaning of the parable is clear it is about the individual, not the situation. It is about individuals looking for an external solution to what is an internal problem.
Such a situation manifests itself in traders. How often has the lament been heard, if only I had a better system, if only I had different data, or maybe if I tried Fibonacci numbers for my moving averages? Many traders have even believed that if they change the colour of their indicators this will somehow improve their trading. I have had traders email me and ask if they should use the same background colour for the charts as I do.
As if altering these external variables will alter their trading performance.
It is undoubtedly true that we need entry signals or setups to enter the market but their importance in trading is vastly overrated. Tomes have been written about signal generation, indicators move in and out of vogue, and each year there is a new trendy indicator in vogue. Yet each new indicator seems to be an iteration of a new indicator which is in turn an iteration of price. And indicators will always be based on historical prices. Until they start printing the prices for tomorrow this will always be the way.
Charts of price action are now being buried beneath layer upon layer of coloured lines. It is as if by obscuring raw price action traders somehow hope to divine its intent.
Traders who look for the Grail are looking for an external crutch to lean on and to blame when things go wrong, these are the same sort of people who blame their broker when a trade goes wrong. If you have chosen to take someone else’s advice or you believe that indicators are all there is to trading then that is your problem no one else’s. No magic indicator will save you from yourself from your folly.
What will save you is an understanding that internal problems such as a lack of discipline or an inability to accept personal responsibility for your trading cannot be solved by some external solution such as downloading hundreds of indicators for whatever charting package you use.If trading were simply about indicators then everyone who owned a charting package would be rich beyond measure.
This is the lesson of the Grail.
