BY IGNORANCE THE TRUTH IS KNOWN

Whether we choose to believe it or not we do not know the future, nor can we predict it with any consistency.  When the future does play out exactly as predicted luck must be credited.

We stock traders love to predict.  When we are right (which is not very often) we are quick to pat ourselves on the back, staking our claim on expert technical and/or fundamental analysis.  When we are wrong we are just as quick to deny responsibility, usually blaming the “market” for its ignorance.  All too often we justify our losses because we mistakenly believe the market is wrong.

But if the truth be known we are the ones who are ignorant and we choose to remain so.  Ignorance can only be used as an excuse until the truth is discovered.  The truth is we are wrong. The market is always right.

So, here is the truth.

We are ignorant of randomness and uncertainty.  We are ignorant of the many reasons others have for buying and selling, oftentimes diametrically opposed to our own.  We are ignorant of the hidden forces that move markets both intra-day and day to day.  We are ignorant of unforeseen news and how the “market” will interpret it.  We are ignorant of our many and varied biases, too numerous to mention here.  In a word, we are ignorant.

But in ignorance we find truth; in ignorance we find opportunity.  We traders can use our ignorance as a tool for profitability.  But can we handle it?

Can we accept that our expert analysis can be wrong?  Can we accept uncertainty?  Can we admit that our decision making processes are often flawed because of our psychological makeup? Can we accept that the market is always right? Can we handle the truth?

If we dare confront our ignorance we can then proceed to admit to and accept our flawed biases.   We can admit that luck plays a major role in our success.

We can actually exit losing trades.  We can take profits without getting greedy. We can cease to fear the future.  We can accept, and even learn to embrace, uncertainty.  We can then use technical and fundamental analysis as tools to manage our emotionally based biases, not confirm them.   We can become consistent in our decisions.  We can become profitable.

We can discover the truth by our ignorance.

 

THE DISCIPLINED TRADER

Technical knowledge is worthless without first knowing yourself…warts and all.

IT’S NOT WHETHER YOU WIN OR LOSE BUT…

the charts serve as a way to manage what is more often than not the unbridled emotions of the traders who are left on their own to interpret random price action from a wide variety of perspectives, none of which are right or wrong.

THE STOCK MARKET

Sure, a trader can make money on a trade but to make money consistently and over a long period of time is, to say the least, difficult.

BUILDING A SUCCESSFUL TRADING STRATEGY

What does it take to develop a successful trading process? Simply put, a combination of technical analysis (TA) and psychological analysis (PA) with an emphasis on the psychological.

SOMETIMES I JUST SITS

Sitting is ok when the markets are not set up for your trading edge…if you have one.

ON BEING WRONG

I am a trader. As a trader I manage uncertainty, or the unknown right side of the chart.

LEARNING FROM OUR STUPID MISTAKES

We were born to screw up, make stupid decisions, rationalize the irrational, form biased opinions even though standard economics assumes otherwise.

THE FUNDAMENTALIST VERSUS THE TECHNICIAN

Well, we can use all kinds of fancy, detailed explanations or we can keep it simple. I choose to keep it simple.

BUILDING A SUCCESSFUL STOCK TRADING STRATEGY

We kicked off our latest webinar with a discussion about how best to build a successful trading strategy.