Wednesday, March 14, 2012

I can predict what will happen in the markets...

It's easy - the market can do one of the following three things - either:

a) go up;
b) go down;
c) stay flat.

Trend followers simply wait for the market to show the way and then jump on for the ride. We do NOT predict. We follow. That way we never end up on the wrong side of a major move, and can never lose our shirt.

The absolute worst thing to do is to be so sure of what will happen, that any risk managment goes out of the window, you move your stops further away, or even average down on your entry price. Remember that your first loss is your best loss.

The desire to make money must be greater than the desire to be proven right in the markets. That is a concept that frankly a lot of people simply don't get. If you're showing a loss in a position, take it and move on. Stops are a barrier that, if they get hit, mean that you are wrong. Get over it.

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