Thursday, March 10, 2016

Que sera sera...

Reading my social media feeds this week there is a lot of negativity out there. Markets are overbought, ECB comments later today will start to bring the markets down, fundamental data is really bad, the pullback within the longer-term uptrend is now complete, blah, blah. Yet here I am holding a few long positions.

Now, they may well be right, and I may be wrong - after all, I'm wrong a lot more than I'm right. And if I am wrong, that is what good risk management is for.

The point here is that, if you use a method that has a positive expectancy, with clearly defined rules of when to buy and sell, then you should ignore what other traders may be saying or doing. If not, then what's the point of creating your own method and rules?

In Market Wizards, Richard Dennis talked about this particular point when discussing the Turtle Traders:

"When we taught our people to trade, I had a hypothetical question: Suppose everything you know about the markets indicate a 'buy'. Then you call the floor and they tell you I'm selling. Do you: a) buy, b) go short, c) do nothing? If they didn't eventually understand that a) was correct because they had to make their own market decisions, then they didn't fit into the program."

The markets could well top out here, and if they do, then no doubt my exit signals will be triggered. And then I will start getting short signals. But I'm not going to predict or act based on something that may never happen. Price will tell me what to do - and when. And anyway, trend followers never get in or out at the top or bottom of a price move. Que sera sera...

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