Why Two Traders Can Interpret the Same Chart Very Differently.

Why Two Traders Can Interpret the Same Chart Very Differently.

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A curious fact about trading is that you can take two different traders and give them the exact same chart and even the same trading pattern, and you will end up with vastly different results. With everything else being equal like knowledge, trading experience, and access to information, why do two different traders behave so differently when they are looking at the exact same market data?

I started thinking about this when my friend and I had been discussing a chart of a market we both had open trades on. At that time, the market was moving against both of us quite severely and it struck me as odd that we had vastly different views even though we had the same trade, and the same thing was happening. I had concluded it was due to the fact one of us had a much larger position than the other, and one of us was clearly far less attached to the trade/chart because they had much less to lose and less skin in the game.

THE REASONS ARE AS FOLLOWS:

1.   Over-committed position

2.   Bias of no position or position

3.   Recency bias based on trade outcomes

4.   Too attached to the market or to the initial view

5.   Indicators vs. clean charts

CONCLUSION:

Two traders can indeed see the same chart differently and often they will get different results from the exact same trading setup on the exact same chart. The common unifier in trading is the price action on the chart, it really is the great equalizer. The price action considers ALL variables affecting a market and that have affected it in the past and displays it to you in an easy-to-read clue-packed ‘portrait.’ Learning to read the price action is how you can eliminate or reduce most of the variables in the markets that confuse and complicate the trading process for most.

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