Traders love to talk about their trading.
It’s much more comfortable for most traders to talk about what COULD BE rather than WHAT IS.
They love to talk about some chart setting up, their view of the political situation . . . whatever.
We all know that talk is cheap. Intellectually, we know that the chart says everything we need to know, but as emotional beings, we are always looking for the “insight” or the “intuition” to put us a step ahead of everybody else, who are all looking at the same charts we are. (See my recent article on managing your work space correctly).
If we don’t have the “eye to the future”, maybe a trading friend has it.
Sometimes all you have to do is call up a trading buddy and say, “Hi, how are you today?” What you’ll get in return will be, “Boy, have you seen the ‘so-and-so’ chart today? If that breaks the XY level, it’s going to really take off!” He continues, “And with that unstable political situation, this could really be a big trade.”
Why should we care?
I guess we could take a look at the suggested chart and apply our trading parameters to it . . . and if it passes scrutiny, well, that would be alright to trade, right? Yeah, OK.
You have to watch yourself, though. You see, you can have a tendency to want to MAKE a trade fit. After hearing all about the great fundamentals, you can (subconsciously) view the chart with “I wanna’ buy” eyes, meaning that you can tell yourself that an almost-confirmation is close enough (with all those fundamentals going for it!).
That’s the danger.
It’s always best, I think, to come across a trade yourself. You see a price falling . . . and falling . . . gosh, when will it bottom? Your system says, “Don’t guess, be patient”.
Here’s one of my favorite expressions:
“I’d rather be out of a market wishing I was in, than in a market wishing I was out.”
So, the market has a nice reversal day . . . new low during the day with a higher close. Getting close to a buy, but not yet. The price goes higher for a few days and then starts to come back down.
It’s looking good. The low holds, the market breaks the rally high and BOOM, we pull the trigger and we are in. The system rules. THAT’s the way to take a trade.
Every trader (you included) has his or her own agenda. Only you know what works for you, system-wise and emotion-wise.
Trust in your tested trading system. It will serve you if you stick to it.
People think I’m crazy when they hear me talking to myself. My close friends know that I’m just getting good trading advice!
Norman Hallett, CEO and Head Trainer of The Disciplined Trader Intensive Program has written a terrific FREE E-book "Taming Risk" which gives you clear risk and money management guidelines to improve your trading plan.