Analyst vs. Market Participant

On the surface, being an analyst and being a market paricipant seem almost identical in nature. Both parties are analyzing various asset classes from around the world to identify potentially skewed risk/reward opportunities to profit from. The steps following that analysis are what really separate the two parties.

An analyst is paid for his/her research / expertise in an area and never actually commits any capital his/her self. Their job is to provide information for other people to make decisions, essentially making their goal to be right, or at least convince people that they’re right, as often as possible.

Market participants however, take the process a step further in actually putting capital to work based on their analysis. In this sense, market participants are concerned only with making money, not with being right, making risk management their number one priority at all times.

This is a distinction that I see reiterated over and over again in my own trading, with these last few weeks providing me with a number of frustrating, but prime examples. (See tweets & outcomes below)

eidochartENZLchartIt turns out that my theses played out pretty much as expected in these specific cases, but none of it matters since I never executed any trades. I share these instances not to cry over spilled milk, or toot my own horn because I happened to be “right”, but instead because I feel that reviewing trades (both actual and potential) are an important part of any trader’s process. We get paid for execution, so anything we can do to help improve our overall process should be done so that we can reach our full potential.

By analyzing missed trades, it gives me the opportunity to identify a few things:

  1. Why I hesitated and didn’t take a trade; specifically focusing on my thoughts at the time, as well as my journal notes?
  2. How I could have improved my process up until the point of execution to avoid thinking too much once the opportunity presented itself?
  3. What is the source of my underlying lack of confidence in my own process (specifically execution) and how do I remedy it?

At the end of the day, this is just another learning opportunity on my own journey as a trader, but it’s also a chance to highlight the very important distinction between being “right” and “making money.” Regardless of your role in financial markets, you need to know what your goal / end game is before you can prepare yourself to achieve it.

As always, if you have any questions feel free to reach out and I’ll get back to you as soon as I can.

*I understand that this is a gross oversimplification, but for the purposes of this post, these are the most important / relevant distinctions.


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