Welcome to This Infinite Game. Before we begin, we must establish the rules:
Rule #1: Price is truth
When I first stumbled into market speculation, I would read in awe at the lengths companies in the finance industry went to gain an edge.
Quant firms employing teams of PhDs in mathematics, physics, and computer science to forecast price movements and develop trading algorithms. High Frequency Trading firms deploying fiber optic cables to transmit data near light speed, and colocating servers in exchange data centers to shave microseconds off latency. Data Analytics firms using satellite imagery of cargo ships and trucking containers to gain insights into supply chain activity and inventory levels before they became publicly known.
I read all this from my office in West Los Angeles, where I had just finished business school and been recruited to lead a cross-functional team—an opportunity I was excited about and not about to leave.
As I searched for the scaffolding upon which I could erect my own edge—part-time, from my laptop, after hours—I surrendered to the fact that I would never be as fast as the High Frequency traders, never as sophisticated as the Quant PhDs, and never as plugged in as those Alternative Analytics shops.
Instead, I planted my flag in technical analysis and began to cultivate a conviction: I didn’t have to be faster, more sophisticated, or more plugged in. Because all that rapid, sophisticated, plugged-in buying and selling … it all appeared in the chart.
I only had to be a fast follower of whichever player held the highest conviction and largest bankroll at any given time.
To hell with fiber optic cables, advanced degrees, and satellite imagery. Price was going to have to move if I were to have any edge in timing buys and sells. And price, therefore, became all that really mattered.
Rule #2: Charts do not predict
My mentors remind me of this time and again: charts do not “predict” price movements. They reveal possibilities and help identify asymmetric bets where a meaningful risk point can be defined.
The point requires regular reminding. The temptation of prediction is incessant.
The true value of price charts lies in risk management—highlighting where markets have been, exposing the path of least resistance, occasionally surfacing setups with favorable risk-reward profiles.
The work of a technical analyst is to identify those paths of least resistance, those prices where participants have acted before and may act again, those setups that offer favorable risk-reward.
Ideally, this work is conducted in a way that binds us to the mast against the siren song of prediction.
Great chartists feature price action that is repeatably identifiable, represents the behavior of certain market participants, and allows for a logical risk-defined entry. In sharing their views, they can inspire other traders to backtest a proof-of-concept, forward-test that concept’s tradability, and eventually shape a trade setup into something living and distinctly their own.
Chart patterns can work, fail, or morph unpredictably. A trader’s job is not to predict the future. We manage risk.
And it is in disciplined risk management—not chart-based forecasting—where any sustainable edge will be found.
Rule #3: Markets are a mirror
We do not know which trades will be successful and which will not. We do not know if our next trade will extend our losing streak or carry our equity out of its latest drawdown.
Yet the human mind is designed to know. Its operating system forces form upon the formless. Without it, we would be paralyzed by the sheer vastness of all that is unknowable when facing each new day.
The game of market speculation is played exclusively in the arena of the unknowable. And because our mind is so ill-equipped to handle this level of perpetual obscurity, it attaches stories to the outcomes of our probabilistic endeavors in an attempt to make sense of them.
A swift reversal immediately after entry? Our mind concludes “we have been trapped.”
A liquidity vacuum right through our limit entry, leaving our order unfilled? “We have been treated unfairly.”
An extended losing streak? “We just can’t win.” Worse: “we don’t deserve to win.”
Maybe that swift reversal results in a loss. Or maybe it reverses again and trends to our target. Maybe that unfilled order leaves us sidelined from our biggest winner of the year. Or maybe it spares us a small loss.
How closely have you examined the stories attached to your trades? Have you noticed their tendency to shapeshift along with the expansion and contraction of the cone of probabilities?
Now, widen the aperture.
We miss our flight. We don’t get the promotion—or the job. We receive a serious health diagnosis.
Just as in our trading, there is the circumstance and the story.
We will never know which trades will ultimately work and which will fail. And because of the inherent uncertainty of markets, we are given the opportunity time and again to peer more deeply into our relationship with the unknown, and to note the stories we so regularly tell ourselves about our reality that simply are not true.
Rule #4: There are no rules
Few crafts are as boundless as market speculation.
Shares, contracts, lots. Points, pips, ticks. Weekly or monthly timeframes. Intraday timeframes. Multi-timeframe alignment. Candlesticks, point and figure, order flow.
One can specialize in asset classes like equities or commodities, in financial instruments like futures or options, or move opportunistically across the gamut.
Before you stands a block of marble the size of Manhattan. As the sculptor of your trading, only you can envision what form lies beneath the raw exterior, waiting to be freed.
At best, mentors reflect your gifts, your shadows, your circumstances back for you to see more clearly. They help you catch the scent of what wants to be shaped by your hands uniquely.
Trading in your 20s? Your rules for sizing positions may encourage amplified volatility in search of maximum return. Until you reach a point—by age or account size—where you change your rules to dampen volatility and increase consistency.
Running an account for a prop firm as your primary source of income? Don’t worry about rules that scale beyond eight-figures. You’ll be pulling money out to cover your expenses rather than compounding the account.
Managing nine figures at a professional fund? You’ll want rules around company fundamentals and macro conditions. Your limited partners will demand sharp rationale for your positioning come your next drawdown.
The game has no rules. You must have yours.
In your hands: a chisel and hammer.
What you carve defines the game.
been in the prop game 20+ yrs, well said