Saturday, January 07, 2017

Focus on what you can control

One thing that has always confused me is where people say you can always learn something from a losing trade.

The fact is that, once you are in a position, it is the buying and selling decisions of other market participants which will determine how price moves, and whether you make a profit or a loss. Nothing else. And how many of those other traders can you control or influence???

I talked about this in more detail referring to trading's equivalent of the 'butterfly effect'.

Sometimes you can do everything right in a trade, and lose. That's because no-one has the ability to predict what will happen in the future.

Of course, there are also times where you can break every rule in your own method, and make money. But over the long haul, that is a losing strategy.

All you can do as a trader is play the odds - in the case of trend followers, we look to jump on a price move that is potentially starting to develop.

But that doesn't guarantee you that it will end up being a winning trade.

This is no different to a golfer who can hit a seemingly perfect putt, yet the ball lips or veers off line out due to a hidden imperfection on the surface of the green. Or to someone like Tom Brady throwing a seemingly perfect pass to a wide receiver, only for someone to intercept the pass - or for the receiver to drop the ball or fall over, or for a penalty flag to be thrown on the play.

Never forget that you can only control what you can control. If you keep doing that, then over the long haul you will come out ahead. As Larry Hite said:

"I knew that if you traded across the board, controlled your risk, and went with the trend, it just had to work."

1 comment:

  1. Thanks for sharing Steve. This definitely made a big difference for me in my own trend following. Thank you for the reminder and hope 2017 is off to a great start for you!