Don’t Ever Become a Dilbert Trader

Boris Schlossberg

This is not a column about politics; but it is an important lesson for traders that I want to share with you today. So please, take your Red or Blue glasses off for a few minutes, and try to focus on the lesson I am about to share.trump-clinton

As it stands now, Donald Trump is very likely to lose the race for the Presidency; not because I desperately want him to, but because he has managed to alienate everyone in the electorate who is not male, middle aged and white.

In fact, there is a good chance that he may not get even 100 electoral votes in November …creating one of the greatest blowouts in Presidential politics since Reagan vs. Mondale.

Which brings me to Scott Adams. Scott Adams is the creator of the enormously popular “Dilbert” comic strip, and by all measures, a very talented and intelligent man.

His ability to gauge and accurately read the social mood of Americans, has proved highly prescient. In fact, he was one of the earliest pundits to understand the Trump phenomenon, and predicted that he would go all the way.

trumpadamsThis was at a time when most conventional wisdom thought that Trump would be gone after insulting the war hero, John McCain.

Adams was brilliant in comprehending that Trump’s appeal transcended reason and logic and hit the electorate directly on an emotional level.

(As my 20-year old son said to me this weekend, “Dad the reason Trump appeals to people, is because he offers simplistic solutions to complex problems, and since most people just want to hear a solution– but don’t want to think too hard about its ramifications – they offer him support.”)

For a very long time, Adam’s thesis looked brilliant. Trump was truly the Teflon candidate, able to rebound from scores of political gaffes that would have forced any other politician to quit.

But then came the Access Hollywood video. Now, whether you think the Trump tape was just the way men talk, or the confessions of an alpha male, it really doesn’t matter.

It showed him in the worst possible light and it made even the most diehard of Republican women (and many men) throw in the towel …especially when they heard ‘what’ he said on that tape.imgres

So, here is where it gets interesting. Did Scott Adams change his mind in the wake of this new evidence? Not at all. In fact, a few hours after the scandal broke, Adams penned a 5,000-word blog post about how he was 98% confident that Trump would win the election.

And this is how very intelligent, highly talented people lose all their money in the capital markets.

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Scott Adams is the classic case of a trader who is married to his position. Think back at how many times you’ve acted like Scott Adams in the past. How many times where you convinced that your point of view would prevail in the markets?

Even as evidence in the form of price and news turned against you, how many times did you stubbornly hold your losing trade… until all hope and money was gone?

And just like Scott Adams, you may have also created a litany of reasons as to why you were still absolutely right. Of course, in the cold harsh light of the margin call, those reasons probably looked like pathetic excuses; but at the time, you believed them fervently, because they were all that you had.

Scott Adams may even turn out to be right.

In politics, as in markets, you never know what could happen from one moment to the next. If Trump does win, it will be due to luck rather than skill, because if we were to run the US election in one hundred alternative universes today, it is completely improbable that Mr. Trump would win (in 98 out of 100 cases).

strong_dollar_weak_economyScott Adams is making a classic trading mistake. He is basing his decision ideology rather than on evidentiary principles. This is how very smart people lose all their money. We’ve all been there. The key for us as traders, is to not repeat those mistakes going forward.

In short, don’t ever be a Dilbert trader.

Until next time,

Boris Schlossberg

Mr. Schlossberg is  the managing partner at BKForex  and creator of the new course The ULTIMATE Forex Trading Course produced in conjunction with Weiss Educational Services. He is also a weekly contributor to CNBC’s Squawk Box and a regular commentator for CNBC Asia and CNBC Europe. His daily currency research is quoted by Reuters, Dow Jones, Bloomberg and Agence France Presse newswires and appears in numerous business publications and newspapers worldwide. Mr. Schlossberg has written articles on trading for SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is the author of Technical Analysis of the Currency Market and Millionaire Traders: How Everyday People Beat Wall Street at its Own Game, both of which are published by Wiley. Boris’ extensive experience in trading and developing momentum based techniques provide the foundation for BKForex strategies.