Financial trading? A science or an art form? This is one of the enduring questions that many would be traders have to ask themselves when starting out.
Trading on the world financial markets in all its forms is a game of risk. It’s one that many people are increasingly prepared to take however in the search for financial gain.
The key issue to trading these markets is that they are somewhat random in their movement. Many first-time traders who have just signed up to binary options brokers or a spread betting company, do so with the view that they only have to learn a formula from which to profit. With all of the course n offer then surely the road to profits is simply to fill in the knowledge gap and then you are away?
Unfortunately, as anyone who has spent anytime in front of their trading terminal will testify, successful trading is not simply the results of being in possession of a successful formula. Trading is something where you need to hone your trading skills. But even then it is not that easy.
The reality of financial trading is much more complex. Of course, many times it has been quoted that the majority of traders will never make a profit. Far more often they are likely to blow their account instead.
Do I think that financial trading is a science or an art?
Well let me address the science part first. There is a huge amount of psychology involved in trading.
Most traders make use of technical analysis. This I regard as the science side of trading as it is very mechanical in its approach. To put it into context it is more statistical and relies on past market moves to anticipate similar patterns of movement in the further.
At its base level, it is no more than a representation of human psyche. This is because behind ever price movement in the market is a human that is prepare to buy or sell the market at a given price.
Now you many want to argue that markets these days are increasingly moved by machines Computers to be exact. However, these algorithms, no matter how complex, are still based upon prior trends and patterns. So ultimately, they are still based on the actions of buyers and sellers in the market.
Where technical analysis differs from science is in its randomness. Science tends to offer solutions that repeatable every time. Technical analysis however offers interpretations that are repeated some of the time.
I think that this is misunderstood by many traders. I would also offer the view that this is the reason why many fail when it comes to trading. They rely too heavily on technical analysis and in turn end of getting burnt.
So my opinion is that financial trading is as much an art as it is a science. While it can be learned and certain methods are indeed scientific, it is not an exact path to follow. Instead trading tools and indicators such as those used in technical analysis should only be used as a guide.
The question of course is that if trading is an art form then who likes the picture?
Well the artist has to draw their own canvass and like their own art. By this I mean that it is important to carve your own trading style. One that you will appreciate and one that will deliver returns.
Artists improve with time. It is important to remember that basic skills have to be learnt to provide a foundation for the activity. Likewise, with trading a certain amount of skills will have to be accumulated.
While I was dismissive of reading a book to learn about trading I whole heatedly recommend that you do. This will help to teach the range of skills that are required for you to build the foundations on which to build your art.
However, it is important to recognize that just because you are in possession of the tools, this does not make the artist. You can still easily fail as a financial trader.
Instead you will need to learn how to use these tools and factor in your subject. In the case of the markets this subject the market will be different every time. It will however at the same time share some commonality with similar pictures.
Take time to learn your trading skills. Start small and build. Don’t expect to be a top trader from the offset. Create a trading plan. Be humble. Look inside. These are just some of the truths that I would advise aspiring financial traders to live their lives by.
Oh and respect the markets.