A traditional monkey trap is made by hollowing out a large fleshy fruit, leaving an opening at the top that is just large enough for the monkey to get its open paw through and putting a favoured monkey food inside.
The unsuspecting monkey smells the food inside the fruit and reaches in to retrieve it.
However the opening, which is large enough for the monkeys open paw to go in, is not large enough for the monkey to pull out its clenched paw with the food inside it.
The monkey is trapped! You might ask why the monkey does not just release the food from its paw and escape?
Well, it’s due to the fact that the monkey has been programmed by evolution to scavenge for food and the idea of giving up food that has been found no matter what the repercussions, is just not part of its DNA.
The monkey will continue to pull at the food with its clenched paw rather than release it and gain its freedom due to its rigid thought process.
In life we are all constantly faced with monkey traps, the main one being short-term thinking and the negative impact these decisions can have on our longer term interests.
So how does this relate to trading?
Trading traps are everywhere and fear and greed is the bait that lures the traders in.
Let’s look at a few:
1. The “Quick Win” Trap
Many forex traders are lured into the quick win trap by clever marketing.
No one wants to hear that forex trading takes time to get proficient at. The ” I made $10,000 in a month using one simple indicator” marketing message sounds much more appealing to the unsuspecting masses than a message like “It will take blood, sweat and tears to get proficient at trading”.
Who is going to pay $5k for a trading course if they hear the latter message or deposit money with a broker. Selling the message that trading is an easy way to make quick money works.
Don’t take the bait! Professional forex traders who consistently make money in the markets have put in the hard work and have come out the other side with a skill for life.
Unfortunately too many people come into the markets thinking it’s easy. I don’t blame them, they are hit with so much marketing of so many success stories it can be overpowering not to want to believe the hype.
There are some good guys out there who are real traders, know their stuff and care about their clients Unfortunately they don’t have massive marketing budgets to promote themselves or do they sell the quick win story that appeals to the masses.
2. The “Secret Sauce” Trap
The secret sauce or magic formula trap sells the unsuspecting trader a fool proof trading system that generates consistent profits across all trading instruments in all market conditions.
It’s usually a technical indicator combo system or an automated EA showing some dubious back tested results.
Anyone reading this who is an actual trader (not a gambler) will testify that in the REAL WORLD back tested results don’t mean shit and anyone selling magic guaranteed money making systems are full of shit.
Developing an adaptive trading approach suited to the trading environment and the instrument you are trading (In the NOW) is your starting point.
The trick is to understand the how, why and when in selecting the right sauce for the right instrument at the right time.
There is a reason why only about 5% of new traders make it past the first 3 months.
It takes time, effort and commitment. If your prepared mentally for this by all means give it go and see if you have what it takes.
If not at least don’t be a sucker for some sales guy with a magic formula.
3. The “Dependency Trap”
Depending on anyone for your long term trading success is a trap you should look to avoid in the long run.
This could be a mix of trading mentors, signal services or trade rooms. Some will have systems that work in specific market conditions some of the time and won’t at other times. The reality is that 80% of the trading game is emotional control which is heavily linked to risk management with the other 20% the system.
Unless you want to hire a psychologist you will need to take care of this one yourself.
In relation to the trading approach or system, in the long run it will be better for you to formulate your own trading ideas if you have ambitions to be a trader rather than a mere follower of someone. Otherwise your success or failure will be based entirely on theirs.
To avoid these trading traps, open your eyes and take everything you hear and see with a pinch of salt, or you too, like the monkey, could be someone else’s dinner.
P.S. No actual monkeys were trapped, harmed or left unfed in the research for this article!