Hello Rookies Bloggers! This week I want to talk to you about an epiphany I experienced, again, just recently. Some of you may have had this type of feeling already and some of you may yet experience this same thing but I am hopeful that in time this piece of trading wisdom comes to you and unlike me you don’t let your exhuberance or your emotions hide it deep in your subconcious and instead keep it at the forefront of your mind so that it can be useful in your trading endeavours.
The epiphany that I am speaking about is tied to another old wall street saying, I know there are many, but they are there for a reason. This one is the old adage “you can be right or you can make money, the choice is yours?” You see we are conditioned or perhaps it is inherent in human nature to be right about things. It doesn’t matter whether is writing a test in school or being correct in a theory to advance a cause that we are passionate about. The “NEED” to be right runs very strong and it can very easily cloud our minds. Think about maybe an argument you maybe had recently, it can be very hard to see the other side of that argument because we all desire to right about our position. This can affect our social relationships greatly but it can also affect our judgement when it comes to positioning ourselves in the marketplace.
Let me give you some background as to how this can affect us and our judgment. If you have been paying close attention to the markets in the last week or so there has been a number of technical clues that the market was running out of steam. First, we had the rolling over of the rebound trend. This was evidenced by the distance between the upper pivots decreasing and a few days of consolidation. Next, we had some indicators that were showing some negative divergences, these indicators are the RSI and the MACD, this was evident on the shorter timeframes. We also had the start of a topping pattern, a double top. From all these things I believe it is easy to see why one could start to get a bearish tilt to the market bias. This tilt can cause one to jump to a conclusion that may not be right.
The problem with letting all this information tilt your thoughts is that the market was still working its way higher and the “NEED” to be right can be very overwhelming and cause reactions that can be very expensive in the markets. Even when we know that we should be patient when it comes to the markets it is not always easy to do because of this need to right on our analysis.
It took a conversation with a friend and fellow trader to remind me that acting too aggressively on our analysis because we must be right about the direction or a reversal is unwise and not good for our profits or trading long term. Once in a while acting too aggressively will make you some money but in the long term,it can be devastating.
After the conversation I had with my friend, I had the epiphany, again, of being patient and not acting on the need to be right but instead acting when the markets presented the “RIGHT” opportunity.