A TAOIST TRADER

WHAT WILL BE YOUR FIRST QUESTION?

Should you decide to become an engineer and design bridges — will the first question you ask be, "Where do we put piles in the river’s bottom?"

Should you decide to become a surgeon and perform heart surgeries — will the first question you ask be, "Where do we make the first cut?"

Should you decide to become a pilot and fly a 747 — will the first question you ask be, "Which switch do we flick first?"

Didn’t think so. You will study the principles of design first, to learn how to build bridges. You will learn how the human body works, to understand the illnesses and cures. You will study how the planes work, to learn to operate them. You will also study how the subject of your occupation interacts with an environment — bridge with its load and elements, body with tasks of daily life, plane with atmospheric phenomena.

Seems obvious enough, right? Well, the first question most aspiring traders ask is "Where do we enter and exit our trades?" For some reason, the necessity to study what market is, how it works, what forces move it, how to read their actions, and how to act to achieve success in trading escapes beginner traders, as if it were understood by anyone by default.

LISTEN TO THE CONVERSATION OF TWO BEGINNERS:

The majority of their discussion will be particular stocks or sectors, entries and exits. Now, listen to the conversation of two traders who survived their first 3 to 5 years, and you will hear very different topics discussed — market philosophy and traders’ psychology. Listen to the conversation of two traders having 15 and more years of trading under their belts, and you will find them discussing… well, dinner menu most likely; their views on the market’s inner workings are likely to be, for all practical intents and purposes, similar.

For as long as I have written about markets and trading, I have emphasized trading philosophy and psychology. Techniques of Tape Reading devotes the whole first part of the book to this topic; The Gateway to Successful Trading course starts with a "Trading Philosophy" chapter. For a long while I was looking for the best and most practical way to describe the inner workings of the market and a trader’s behavior in it. The answer dawned on me during a discussion with a good friend and fellow trader Mark ("nemo.") Trained in the arts and philosophy of an ancient discipline, and seeing parallel ideas in my writing, he saw it fitting (and I am very grateful he did) to introduce me to that philosophy.

ENTER THE TAO

According to the philosophy, Tao is the ultimate origin of all things, physical and metaphysical, that operates through principles that can be observed in the world around us. Tao is a law according to which everything happens. Call it Laws of Nature; call it set of rules; call it natural patterns, or call it guiding spirits — whatever your concept for it is, everything we observe is a manifestation of the Tao and functions according to its rules. Yes, that means you and the markets too.

The classic text of Taoism is the Tao Te Ching, written by Lao Tze about 2500 years ago, and is the second most translated book in the world. The book consists of 81 short poems. There is no direct way to accurately understand their meaning, for a few good reasons. The poetic form does not easily lend itself to strict logical concepts and concrete interpretation. The author had not intended the meaning to be easily understood. Finally, translation from Chinese is a subject of interpretations, and a translator without subject matter expertise (in this case without a Taoist master) is prone to error. For the purposes of this course we are using the translation by Lin Yutang; most importantly, for interpretation, we use the excellent works by Grand Master Alex Anatole, The Truth of Tao and The Essence of Tao. By no means should this course be considered the work by which to study Taoism. This is a course applying the Taoist philosophy to trading — for a more comprehensive explanation and understanding of Taoism I’ll direct you to the aforementioned books and Alex’s site. The books unfold this amazingly pragmatic philosophy in a logical and elegant way. The reader will undoubtedly be fascinated by the direct practical applications, clarity and delicious paradoxes of the Taoist way of thinking.

EVERY CHAPTER IN THIS COURSE CONSISTS OF THREE PARTS

First (in bold italic) is a poem from the Tao Te Ching. We used 44 chapters in our course. 27 of them are the main poems describing vital principles; 17 are supplementary, providing a somewhat different angle, new detail or a refresher.

The second part (in italic) is an explanation of the poem’s basic meaning taken from the works of Grand Master Anatole. Corresponding parts of the poem are recited for clarity. Make sure to read it with great attention. Taoist thinking is not immediately obvious; it relies on paradoxes and is expressed in a way that requires a certain mental adjustment. You will be amazed to see how the meaning of the seemingly vague words turns around and become stunningly clear — when you start thinking as a Taoist.

The third part (in normal font) is the trading application. This is where we turn philosophical abstractions into practical application. What the market is. What your place in it is. What forces move it. How they act. What their motives are. How to read their intentions. How to act to stay safe and profit from the action. How to condition your mind to act in a disciplined cold-blooded fashion. Taoist principles create the canvas that we use to combine these concepts and beliefs in a clear well-structured trading philosophy that governs your actions and gives you inner strength to follow the right course.

Going from chapter to chapter, you will encounter some themes more than once. Some of them are only touched briefly in early poems and expanded in greater details later. Some of them are combined to show their interaction. Some are shown from different angles to demonstrate how they influence various aspects of market action. Don’t rush through the chapters — soak the content in, let it blend together. Gradually, you will sense a whole new outlook being formed; no side of the market will be seen as standalone — instead, it will all come together in amazing clarity. Read the course carefully and apply it methodically — and many confusing aspects of market events will become clear. You will find yourself having unambiguous recipes for your own actions and the ability follow them with resolve and discipline.

THE COURSE ADDRESSES THREE MAJOR ASPECTS OF TRADING

• Understanding the inner workings of the market
• Understanding thought process and guiding emotions of other traders
• Understanding and controlling your mindset and actions

WHAT YOU GET IN THIS COURSE

1. One year access to A Taoist Trader course. Why that long? Because I want you to return to it a few times. Repetition is the mother of all learning. As you apply the principles in practice, you understand them deeper, see new connections, come to new realizations — and as you re-read the course again, you discover new ideas that you missed on a first read. It’s a process — give it time.
2. Trader Routines attachment — templates for your actions in standard trading situations. PDF, downloadable, yours to keep.
3. Classic Taoist meditation techniques attachment — for pre- and post-market. PDF, downloadable, yours to keep.
4. Tao Te Ching in Lin Yutang translation — PDF, downloadable, yours to keep.
5. Art of War by Sun Tzu — "The Oldest Military Treatise in the World," classic book on military strategy and tactics with much wider applications than military action. Armed with knowledge obtained in this course you will have no troubles finding practical applications for Sun Tzu’s principles. PDF, downloadable, yours to keep.
6. Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay. This delicious mind candy, first published in 1841, describes crowd’s behavior in bubbles throughout the centuries of human history. It’s a perfect study for the irrationally of trading masses. PDF, downloadable, yours to keep.
7. The Writings of Chuang Tzu. Classic Taoist texts to enjoy unhurriedly. PDF, downloadable, yours to keep.

QUESTIONS ABOUT THE COURSE?

In response to your questions, we have set up a Q&A section, which you can view here.

LASTLY...

Last comment before moving to the course itself: do not take it as stiff dogma. You may find different analogies or applications for some of the Taoist principles, or think of something better suited to your particular situation. Taoism is nothing if not flexible, and Tao is bigger than any of us. As long as you comply with natural laws, such modifications constitute finding your own niche and can only be commended.