Holy Shit!!! It's happening again!! I know where the market is headed, I have seen something similar in the past , and the market behaved exactly like this. Hurray !! I can Predict the market !!
Predict ? Okay , so you can tell the direction in which market is headed..cool , There's 50-50 chance that will happen,
but then what about depth..How far will the market go in that direction ? And what about time...what's the timeline for that move...You know the market can remain irrational longer than you can remain solvent ?
Well, you know, I have a special gift.
And that my friends is the biggest mistake of my trading life , thinking I can predict and play the market.
The moment I realized that I do not have any special gift, am just another person on the street, trying to make a few bucks, I was out of my misery.
I stopped trying to predict the market, rather learnt to move along with it.
I realized market can move in any direction , be prepared with what to do in either case...that's basically having a "PLAN" as in trading Lingo. Not strategy as a whole, but just a plan i.e target , stop loss , position sizing.
Here's what a trading day looks like for people trying to predict :
Let's do some simple Maths here on Planning.
Assume you have a strategy that's favorable 50% of time.
You have set stop loss at 1% move , target at 3% move. Also assume market movement is directly related to profit /loss %.
50% trade fail . In each trade we lose 1% i.e. 50% loss total
50% trade result in profit. Total profit for 50% trades = 50 x 3 = 150%
Net profit : 150 - 50 = 100 %
OF course it's a bit more complicated than that, for eg, no. of continuous winning / losing streaks changes the capital ,market may not reach target and reverse( trailing target will help here ) etc,
but this is just to give an idea of what simple planning can do.
Someone rightly said, only when you accept you are mortal, can you be truly immortal.
Well, to be honest I just made that quote up, but who cares ? Done a mistake, Lesson learnt , One step closer to Nirvana.