Principles And Elements Of Trading

[Mulling] Ever wondered… if there’re principles and elements of trading?…

Mom!… Mom!… Jamal screamed.

“Yes, Jamal”… Sylvia responded.

[excited] “See that piece”—it’s so perfect mom!

Jamal was at his last state of dopamine… as he glanced at the [perfect] art piece. [whispering] “I wonder how artists get to do this.”… [mulling] argh… “maybe they are magicians”.

[shouting] Mom!

[looking sternly] Oh! my God… [muttering] “what is it, Jamal?”, Sylvia dismissed.

[remorseful] I’m sorry… I just want to know—how they create such amazing pieces.

[hushed] “Jamal”, Sylvia speaks… “they have principles that guide them; elements that form them.”

[astonished] “Woah!… Since art has its principles and elements; “trading” is an art!—do you think trading also has its own—principles and elements too?”… Jamal asked.

Sylvia [pondering] hmm… Good question Jam [beaming]. I haven’t actually thought of this before. You know, as traders—we definitely need a guide. If not, we would never be successful… Just like the artist…

[confused] erm… What are you saying, mom…Jamal asked again.

Sylvia responds, [hastily] “Yes! trading has its principles and elements.”

The art, elements, and principles of… trading differ.

For art—line, shape, color, texture, space, and form are; its elements… Balance, proportion, perspective, rhythm, movement, unity, and variety are; its principles.

[pondering] Not sure how that relates with trading though. But, I can teach you what I know Jam…

[excited] “… Am all ears!”, Jamal responds.

The Art Of Trading…

That was a short anecdote. I needed a diversion… So, I finagled my way through. You see when I say… “trading is an art” or rather… Jamal did.

I actually mean it. [pondering] hmm… Wondering if Jamal did?

[reflecting] Art… Art… hmm—Where do I start from?

Okay!… I’ll ask a question. Do you believe trading is an art?

Ever heard of, “Draw what you see; not what you think you see”…

As traders, it’s necessary we trade what we see—not what we think we see.

Also, do you believe that… the best strategies are found within—one’s self?

Art is actually subjective. Depending on the context; it can mean different things—to different people. 

In this case, it’s a verb. Simply put—It is something we do. 

The dictionary (Wikipedia) definition of “art” is… “a wide range of “human activities” that involve creative imagination—It’s also an aim to express—technical proficiency, beauty, emotional power, or conceptual ideas.”

Oxford has something to say… “the expression or application of human creative skill and imagination, typically in a visual form…”

Finally, this guy has a say in this… “Art is an expression of our thoughts, emotions, intuitions, and desires.” 

In-Depth Discussion…

Hmm!… Let’s hand-pick this one.

“Human activities”… In this case, the activity is “Trading”—An art!

Another is “imagination”—Most traders have refused to believe in their instincts, which might be due to fear or lack of knowledge. Who knows? [hastingly] But, still an art.

Thoughts, emotions, emotional power (psychology), visual form (your eye is a tool)… Ever heard of, “Draw what you see; not what you think you see”…

Similarly, As traders, it’s necessary we trade what we see—not what we think we see.

So when I say—“trading is an art”… It simply means, “buying and selling” that involves emotions, thoughts, visual form,  desires, and human activities.

Where do this buying and selling take place? [hastingly]… wham!… Figures… “elements”—duh!

Yup. The topic is still on the; principles and elements of trading. 

Now if you go to the market, you have $500 [sarcastic laughter]… You’re probably poorer than that. But, anyways—you want to get stuff.

You need to plan right? [grinning]… Principles!… [annoying smile] I know, I know, “she’s a genius”.

Why?

Simple! without planning, you’ll probably; buy what you don’t want or be stranded.

Now, do you believe—Trading is an art? Of course, you do. Duh!

Principles And Elements Of Trading

Let’s talk about its elements and principles. Shall we?… [discontinued] erm… before that, Sylvia already spoke a little—on the definition of “elements and principles”. But, I didn’t.

I’ll pick them one after another…

When you say “elements”, what do you mean? The dictionary definition is—“an essential part of something… its constituents—components… portion, piece… [pertubed] If you still don’t get it, pele! [sorry]. 

Elements of trading can mean… Parts/components of trading. So, What makes up trading?

What Makes Up Trading?…

For art, we have—line, shape, color, texture, space, and form. Look at the piece below; what do you notice?

The elements of art (line, color, space, texture, form, shape…) coming together to create---this beautiful piece.
The elements of art (line, color, space, texture, form, shape…) come together to create—this beautiful piece. What do you think makes up trading?

 

All these “elements” (as listed above) come together to form that picture. Without “lines” that picture would probably not exist. So can you guess what makes up trading?

[sigh] Anyway, that’s probably why you’re here. To find out!

Trading—been a broad subject, also has its elements. Since elements are “components”  [sigh]… We can say that the elements of trading are:

  • People
  • Platform
  • Pairs/products

[lamenting] It’s usually called the “four P’s”. [laughing] But, I made them three, Why? Simple!.. “Pair and products” can stand for the same thing. Should I pick them?… [grunt] That won’t hurt.

 

Elements Of Trading: People… Hmm!

Every decision ever made by—us… Fears, greed, confusion… are all represented. That’s what you trade! 

You and I—are the more reason… why there’s a “buying and selling” happening in the first place. 

[Sylvia mutters] I’ve learnt over time to not outsmart the market. You’ll lose Jamal!—You know why? [Tuts] It’s cos’ she’s more smarter.

Imagine predicting something—insecure and indecisive humans control. Trust me… Heh—Pretty exhausting!

the candles you see represent… “a humans decision”- Lazyluchi

Those candles you see; are actually live animals [blushing] purchasing goods and services. When the market is fearful, We have the angry bears trooping in… [smirk] whatever bears do.

Also, when there’s greed—Bulls!

Do you get that? You are a very important tool for trading. The market is grouped into—uptrend, downtrend, and consolidations.

Hmm! [curious] wonder what these animals do in consolidations… Maybe mate [jittering].

Platform.

Next is a platform. Technology… has made it easy for these “buying and selling” to happen at your convenience [grunt] and I don’t mean ‘toilet”. 

In the previous years, You’d need to go to the bank to make a trade right? But, now you can do it with just a phone and laptop. Considering… you have one of course. 

There’re different means, the popular ones are—Trading view and Metatrader. With these guys, you can make a trade with ease. Still a major component… Don’t you think so?

And, Finally—Pair/Products,

“Another major part of these elements”, I must say. What in the world will you trade if there are no products or pairs available. [crickets]… I thought so too.

Nothing!

This isn’t supposed to be lengthy. But, you must have a favorite pair right?… Do me a favor, [smirk] List them in the comments below. I’m just a curious cat—Don’t kill me.

What Controls Trading?… 

The principles of trading, are basically—what makes the “market” move. [sigh] What controls the market?… What are the rules guiding the art of trading? 

For art, we have—Balance, rhythm, perspective, proportion, variety, emphasis, unity… These guys together with the “elements” come to give that 3d feel. They make art feel alive. [pondering] hmm… What makes trading come alive?… “I wonder”.

So what then is—principle?… it’s a kind of rule, belief, or idea that guides you.

According to a guy named “Cambridge“—He said, “… a basic idea or rule that explains or controls how something happens or works”

Since principles are guides, rules, and controls, We can say that—“principles of trading are remote controls to trading… If known, they’re key to a successful trading life”. [anxious] Hmm!.. What then are the Principles of trading?… Any idea yet?… Crickets!… I thought so. [grinning]

Principles And Elements Of Trading
This shows that without proportion and perspective, we wouldn’t have a seasoned 3d picture…

I’m going, to sum up. Usually, there’re lots of rules (remote controls) to trading. [silence]… But, there’s a particular guide you need to know; this one is important. That rule is—Price-action.

Ever heard of this quote:

… The market speaks its own language; That language is Price-action – Nail Fuller

Principles Of Trading: Price-Action…

Price-action is really not the only principle. But, [expletive] “F”  the others. The very best traders out there… are slaves to price-action. Read that again!

Under price-action, [sigh]… I might have to group this; You need to know the “market stages” and “market structure”. [pause] Don’t get it twisted… it’s grouped under this—price-action. I just needed to specify that.

So, the word “price-action” is basically… market movements, activity, work—happening both past-time and over-time.

Price-action forms the basis for all technical analysis of “any” asset. Listen, [curious] keyword—“any” meaning, all pairs, products, commodities are influenced by this [price-action]. 

Since this is a major principle of trading, it’s something you want to pay keen attention to. [clattering] In fact, all your indicators are actually controlled by these price movements.

Without price activities, there won’t be any data for the indicators to work with.

According to the price-action god himself—Nail Fuller… He said, “… this allows a trader to make sense of a market’s price movement and provides him or her with explanations that serve as a way for—the trader… to build a mental scenario to describe the current market structure.”

Nail—further went on to say, “A trader can use a market’s price action to try and describe the human thought process behind a market’s movement… Every participant in a market will leave price action ‘clues’ on a market’s price chart as they trade their markets, these clues can then be interpreted and used to try and predict the next move in a market.”

Check out his awesome website for more on this principle… [jittering] I mean—it’s his field.

Together with; the market structure and market stages, price action is key to a successful trading life. 

Final Words On The Principles And Elements Of Trading…

In all this, [grinning] I never gave you a proper definition.

Principles and elements of trading… are basically working tools—a trader needs to a successful trading career. [smiling] keep it simple [expletive]… Nah! scratch that—stupid!

Also, you can say. “the elements manipulate the principles… without the elements, the principles don’t exist—vice-versa.

Elements-tools; Principles-toolbox. What else is missing?… [assignment] Leave that in the comments.

Now that you know these principles and elements, I can boldly and confidently say, “you’re ready for the markets”. [that serious face] Don’t get it twisted—You need to put in the work. Just knowing stuff ain’t enough; The work’s needed. 

Here are the key-take-outs:

  • Elements of trading can mean… Parts/components of trading.
  • The elements of Trading are; People, platform, pair/products.
  • We can say that—“principles of trading are remote controls to trading… If known, they’re key to a successful trading life”
  • Usually, there’re lots of rules (remote controls) to trading. [silence]… But, there’s a particular guide you need to know; this one is important. That rule is—Price-action.

So…

[yawning] Did that help, Jamal? Cos’ that was a long talk…

[astonished] Mom!… Damn… That more than helped. I can feel my trading career moving to its peak. Thanks, mom.

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All my articles are entirely a work of fiction. The names, characters and incidents portrayed in it are the work of lazyluchi’s imagination. Any resemblance to actual persons, living or dead, events or localities are entirely coincidental. 

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