TRADING STRATEGIES 2022 by Warner Daphne

Author:Warner, Daphne
Language: eng
Format: epub
Published: 2022-08-04T00:00:00+00:00

Chapter Four

Reacting to Your First Loss

Many times, it is noticed that traders who have a powerful personality or a great intellectual ability are the ones that constantly disobey this rule. For reasons that are both succinct and accurate, these traders are often in a position to forecast market highs and lows in advance of significant price movements. They also have a propensity to act quickly on possible transactions, causing them to incur losses before they finally succeed in getting on the winning side. Because of how strongly they believe in and are committed to their hypothesis, they consistently act in a manner that corresponds to the side that they believe will be the decisive move. Some of these traders were correct in their hypothesis so early on, but they continued to trade from the incorrect side for such a long time that their account equity was significantly reduced by the time they reached that point. When the major move finally happens, there will then be a chance to go back to even with the previous move.

It is possible for a bull market to cease being a bull market well before prices reach their peak, and it is also possible for a bear market to stop being a bear market far before prices reach their low point. In all honesty, this is the truth that these traders often observe. They are looking far enough ahead to understand that going in the other way has a bigger possibility, and they are aware that the turn is coming up soon. They might even spend a lot of time in analysis trying to find the right time/price relationship, and then they might take quality positions that have an initial small gain. However, if the market continues to move sharply in the direction it was going in, they will eventually be eliminated from the market. This sort of trading circumstance gives birth to the antiquated dictum, "Don't choose peaks and bottoms," but the reality is that sooner or later a market must top or bottom; the turns always have the lowest risk and the best reward potential.

Finding those twists is a very other problem, and I don't even go into it in this book since it's not relevant. In the current state of the market, I am of the opinion that all of the resources and information that are required to identify big inflection moments are readily accessible everywhere. The issue is not that you are unable to recognize the turns; the issue is that you are too early.

The concept of nonattachment serves as the psychological foundation for this guideline. A great many of traders have not yet established the underlying capacity to sufficiently remove themselves emotionally from price activity. If we have a solid grasp of the market we trade, we are highly confident in our strategy, and we know that we will not be able to make a profit until we buy low and sell high, then all of our knowledge and preparation will, at some time, cause us to feel the need to take immediate action.

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