Have you ever loved something so much and it just didn’t work out? Maybe it is a sports team, an animal, or maybe you developed an allergy to cheese. Whatever it is, you guys aren’t together anymore.
Price action is the same way. No matter how much you love a market or stock is it does not have to move your way. It seems like I see an argument almost daily about how an instrument is oversold or overbought or whatever indicator and where it has to move next.
Here are a some things to consider:
The more eyes the better: Extremes are going to attract eyeballs. More eyeballs more chance of a reaction in the “right” way. With that being said, the extreme is not as important as the reaction. What do they do when they get there? That is the important information. I think Stevie Place (he prefers to be called Stevie so everyone start doing it) said it best that a break of a trend line is not bearish or bullish it is neutral. Remember, records are made to be broken. When the market gets stubborn you can’t be.
The 1% is dangerous: Just because something is 99% accurate it does not mean it will protect you. It means that 1% of the time you vulnerable. It only takes that one time to burn through your money. This means that no matter what trade you place, know where you are wrong and stick to it. Do it before the trade starts so you aren’t making a decision while emotion is pouring down on you. They say big things come in small packages but big risks come in small likelihood of outcomes and vice versa. Don’t become a statistic.
Use irrational to your advantage: I do not care how many years or how many situations a trader has been in. If the “has to” or “must” thought comes into the trade plan and decision making it is irrational. How much information and situations do you have to ignore for this to even be possible? Most of it. Do not get me wrong, there are times when it is close to that but other things still have to come into play. Many traders do not understand how to get that type of vision or be able to execute a trade in the way so that they are net positive when those situations occur or don’t. When I start directing the market instead of letting it direct me it scares the shit out me. It means that I let something external creep in and/or I am over confident. The crash always comes.
There are times when you love a setup and it does not work. That is fine, learn from it. The market has many variations. The key is to understand the subtleties. It is easier to learn to love again if she does not drain your bank account.
I wrote this post a month ago but was looking for something else to tie it together. Check out The Kid’s post on Ackman and Herbalife as it is a good example as what this looks like manifested. I am sorry but 230+ plus slides seems ridiculous. A story must be simple to travel. Regardless of the outcome of the trade it is not what we do once it is what we do last, in trading.
The obvious place this title could have went is if I love trading, will I succeed? The answer is no. It is and will always be about learning in the most efficient way. Learning is relentless in this business. Learning to learn is a skill. Now, loving it might help you get through the things that all traders go through to get to that point. And the fact is that many traders torture themselves along the way. Part of it is ego and the other is because we all know so much. The least productive part of the process is learning what you do not know. The faster you get through that the better off you will be. In the end, love is part of the equation but not all of it.
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