A chart records, it does not explain.

The market is a communication device, a chart is the recorder. It is easy to forget. A chart tells a story, it does not predict with certainty the ending of that story. It always reserves the right to change the ending or have no ending at all. It also has the power to start a completely different story. We are here to listen and within our trading rules/risk parameters, we formulate a potential ending. If the ending is no longer likely we have a choice. Get out, hope and pray, or at the very least get taken out.

How you arrive at the ending is up to you and based on your experience. When the ending does not make sense you have two choices. Complain or figure out why you did not come to that conclusion. Figuring out why is hard. It shakes your foundation that foundation may have taken 6 months or 6 years to build. No matter what, it is difficult. You need the answers when they are hardest to find, when you are at your weakest.

If you cannot find a reason, than make one up. I know that sounds crazy. It could be that it was an aberration and you only have to worry about it once in a while. It could be the start of a new pattern or trend. That will become evident quickly. Keep a good trading journal and have a plan.

A chart or indicator is only as good as quantity behind it.

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3 Responses to A chart records, it does not explain.

  1. […] This post was mentioned on Twitter by Eli Radke, Eli Radke and Eli Radke, Trader Habits. Trader Habits said: A chart records it does not explain. http://dlvr.it/5mXtB […]

  2. […] October 4, 2010 by TheTrader'sNews Leave a Comment A chart records, it does not explain. […]

  3. […] how I feel about charts and I could argue my opposition’s side, too. My main point is that a chart records, that cannot be argued.   Charts can even be self fulfilling prophecies. Charts are very useful […]

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