When you know what you’re looking for, then you’re never lost.
A phrase we say over and over in our community because overwhelm is the most common problem for stock traders. Trying to interpret everything is hard, and not necessary for profitable trading.
Giving price action a structure makes it easy to know if what you want is there. Or not there. That’s the easy part.
The hard part is acting on what you see. Too often we trade based on what we want to happen, instead of what is happening.
For some reason people want to predict the future. Good trading isn’t about predicting. It’s about building an argument for what’s likely to happen, and choosing the right risk based on the likely reward.
To a new trader that sounds like the same thing. But it’s not. The subtle difference comes when you’re actually in a trade. When you predict you defend your knowledge of the future, and that can be very expensive when you’re wrong, Just ask everyone who shorted the market from January through July.
They lost a small fortune.
But good traders, profitable traders simply ask what’s happening now? And how do I know when it changes? It’s a much easier place to live. You’ve not focused on the future, you’re focused on now. And now is where we make decisions.
Stocks rallied on light volume after a bullish momentum reversal. The same price action as last Monday.
The ‘three-majors,” the DOW, the S&P 500 and the Nasdaq for now, are bearish to neutral. All three sit just below major resistance levels. That’s the current price action.
I’ve reduced my risk until the road opens up. When you pay attention, and don’t dig a hole, it’s easier to be profitable.
Think long-term. We’re not getting paid by the hour.