The Path of Least Resistance

The Path of Least Resistance

By Andrew Menaker, PhD

Most traders are familiar with the idea of support (demand) and resistance (supply) when looking at a chart.

As a trading psychologist who’s also an active trader, I’ve found these concepts, especially resistance, can be applied to the individual trader, not just a chart.

 

We know that price tends to follow the path of least resistance. The same is true of most individual traders. An individual trader following their own path of least resistance is the trader who’s taking their well-worn path.

Unfortunately, this well-worn path of least resistance is often one of repeated mistakes. Freezing when they should be pulling the trigger, or perhaps jumping in impulsively.

Here’s another example of applying the path of least resistance to the individual trader.

When new, or even experienced traders run into problems, they typically try to ‘work harder’ in some way. Looking at more charts, reading more books and blogs, trying to follow someone else, and staring even harder at the charts!  Not to mention wishing, praying, and hoping.  But the irony is the struggling trader will often continue to follow the same path of least resistance in terms of their actions.

If you believe you have an edge but are unable to execute on that edge, you have two viable options.

You can decide to give up trading, or you can face the path of more resistance instead of taking the path least resistance.

Getting new software, indicators, joining another chat room will not get you past the resistance. You’re welcome to try, but the trading road is littered with people like this. Although you may not want to admit it to yourself, you know I’m right. 

In order to be a successful trader, you have to be different; you can’t continue to take the path of least resistance.  If you’re a trader who has a hard time taking a loss, or waiting for the right entry point, or prematurely exiting winning trades at the first sign of heat; that is the path of personal resistance that needs to be addressed.

A trader needs to be very honest with him or herself. Believe it or not, once you have an edge, self-honesty is the first step to making money in the market.

If you know what the real issues are that are causing you to be breakeven over time or continue to bleed money, are you going to continue taking the same path of least resistance? Only you can answer that.

Andrew Menaker PhD is a trading psychologist; you can read more about him at http://www.andrewmenaker.com