from talkingtrader.net (not an advertisement) - just quoting the source.
JJ
***
Global Chess Games
When I first began day-trading in 1994, it wasn't a profession that very many people knew about, were interested in or could enter. Trading at one of the first "upstairs" firms, aptly called "Electronic Trading Group," my objectives mystified mostly everyone but the floor traders who had invited me to learn to trade.
In fact, when I moved to NYC to build a trading desk, I could not get anyone on Wall street - including the NYSE and clearing firms - to understand how the traders would make money. The only model they knew was the commission model. The idea that anyone could make money buying low and selling high was unbelievable to most everyone.
If you had an internet connection, it was "dial-up." But in fact, an those internet connections spread throughout the late nineties so did the tech boom. As more people were able to "invest" via a telephone line and a computer, more people translated their awe of the technology into positions in tech stocks.
Fast forward a few years to the spread of broadband data connections and now the whole world becomes one big trading floor. Thousands of traders in every country can now trade in the smallest of time frames.
What is the point?
Traders all over the world are sitting in front of screens. They have quote data and technical indicators and at least a modicum of a system. They all want to buy low and sell high.
Everyone has the same data. Mostly everyone has studied it and devised a semblance of a plan. Many of those plans revolve making a move based on similar conceptual ideas - moving averages, standard deviation from the mean bands, overbought, oversold.... you name it.
In order to consistently take money from this global chess game, you need to think about what is everyone else likely to do in any given scenario. Where are they going to put on positions and where are their stops likely to be? Now you might be saying, "well I can't know that." You can if you step back and think about the aggregate.
Thinking like this will give you a couple of advantages - it will help you stay out of the random chop and it will deter you from trying to buy bottoms and sell tops.
What impact would that have on your results? Let me tell you - it will save you capital and it will save you psychological energy. By saving both, you will have more of both to spend when you are very clear about why you are going to make a move and what is the move most of the other players have made.
It isn't you against those numbers - it is you against people who have all the same numbers and you against yourself. Build yourself a scaffolding of edges around those realities starting with an understanding that you are trading with a trader on the other side of the world who has done just as much work as you, or more.
It really is a global, electronic, anonymous chess game. It is a chess game nevertheless.
