Arbitrary definition
is a rule, law or principle which held in place will crash a statistic.
In trading the only source of security of the individual is the individual themselves and thier own actions.
The only way to succeed as a trader is to know what your doing and why your doing it. This doesn't just mean philosophically, in the sense of why are you trading, but why are you placing this trade.
This leads us to our concept of compulsive trading, which we could also define as placing trades out of fear of missing out or confusion.
A trading arbitrary could be a simple as a principle you operate on or an idea you have about the market which is not true and can take the form of repeated action not based on observation or conclusions using present time data but past successes.
This can be summed up in the mindset of, I traded like this in the past and was successful so if I keep trading like this now, I should repeat the success.
This is typically an unconscious behavior pattern(Something an individual does without being fully aware of what they're doing) and is one of the reasons a trader can be bogged down (Not make improvements in terms of their trading ability, Which is thier ability to analyse the market)
When I mention repeating the same actions of the past because they're successful, I do not mean that a trader shouldn't continue to apply and refine their stratergy. I am referring to the decisions they make and how trading arbitraties can lead an individual into making subpar decisions overtime which lead to their own detriment.
An arbitrary is an effort to put thier trading actions on "Automatic" rather than actually confront the market and different economies.
In trading the perfect cycle of action would be this.
However it is important to note that not all trade you place will get the expected results. I have covered this in previous articles but the reason for this is:
1) Wrong Direction of the market- You thought the market was going up but it was going down
2) Too tight of a stoploss- you were right about the direction of the market but your stoploss was too tight.
3)Missed Exit Opportunities- You had the opportunity to close a trade at a decent profit but it started to reverse and you held onto it to long hoping it would continue in your favour but didn't
4) Compulsive trading and all its component parts
5) Trading anomalies- Unexpected events or news which you didn't factor in or were unforseeable based on your current understanding of trading, finance and economics (i.e a bank collapse)
A Trading Arbitrary doesn't fit into this list because this list contains the all the reasons why an individual trade would lose. A trading arbitrary is one of the reasons why a beginning trader would lose. Its more of an awareness and alertness point rather than a technical or philosophical point as the list above points out.
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