While this is normal for novices in any field, there is a big difference between, say, a novice guitar player looking to learn how to play the instrument, and a novice trader wanting to learn how to profit in the markets.

The guitar student can and needs to learn from a proper teacher because the fundamental basis of playing the instrument is the same for everyone.

While methods of teaching the fundamentals of guitar playing will vary widely, the practical and theoretical aspects are the same. As such, the student needs a teacher who is well-versed and experienced in both these aspects.

Traders on the other hand, do not. 

Why?

Simply because, contrary to popular belief, schools, the financial media, and mainstream commentary know precious little of value to the new trader.

In a lot of cases, it would not be remiss to say that those whom new traders look to learn from know as little as the aspiring neophytes – which is to say, nothing.

This is obviously a very controversial statement, and it will rub a lot of people the wrong way. But, consider that conventional thinking perpetuates reductive thinking, cognitive biases, and in some cases, flat out inaccuracies.

For example, a novice trader who voraciously consumes financial media in the mistaken belief that doing so is a good way of learning how markets and the economy function will achieve the opposite result.

This is because headlines and analysis provided by the vast majority of the media, both mainstream and non, tend to mistake correlation for causation, and oversimplify complex issues. They also tend to espouse narratives that are either untrue (like how QE is effective when it’s not), or are products of the narrative bias.

At the end of the day, the financial media has to report on what happens in the markets/economy, even if nothing of note has occurred – it’s simply their business to do so.

Another way to think of it is that they are in the news business, not the business of generating investment returns. Which means that, in the age of the 24 hour news cycle, they have to report on even the smallest occurrences, regardless of how insignificant they are.

Exacerbating this problem is the fact that conventional economic thinking bases their reporting and analysis on what they learned about the subject in university, which, on a macroeconomic level, tends to be inapplicable to the real world.

Good examples of this are the mistaken belief in central bank omnipotence, and how money is created in the economy.

Considering that these two beliefs are the fundamental building blocks of how modern financial systems function, misunderstanding them can only lead to flawed analysis and conclusions that are simply untrue.

While it isn’t their fault that a lot of what they are taught about how the economy works doesn’t apply outside academia, their constant barrage of narratives and analysis based on mistaken beliefs only serves to spread and perpetuate misunderstanding. 

Why would any new trader want to even step into such a quagmire?

To be continued…