Uncertainty creates confusion. And confusion causes emotional decision making. And emotional decision making is often a recipe for disaster. In hindsight it is always very easy to look at a chart and study price by whatever method you prefer, making moves look so simple.
You tell yourself, you would short here, cover there, go long at that level, set my stop here, etc. Yet when you are in the moment, there is no such clarity. I guess you could call it the “fog of trading.” You see candlestick patterns, trend lines, etc which one day look bullish and then hours later appear bearish. You end up driving yourself mad trying to figure out how things changed so quickly.
I like to use past events as an example of what I mean. And I don’t do this to draw analogies in terms of price action as to where we are now. I simply do this to show how often, if we are unwilling to simply “let the pots soak” we may just let an opportunity pass us by. Right now the model has given short signals on the major indices. In the past such signals have lead to the flash crash, the July 2011 selloff and stop outs. You never know what you will get, but you have to at least take a chance. Read More »
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