Be In Harmony with the Market
We make money trading when we are in harmony with the market. We are long
when the market is going up, and short (or out of) the market when it is going
down. If we bring an opinion with us while trading, we will end up fighting the
market. We keep trying to go long as the market is declining, or we keep shorting
a market that it is in a bull phase.
DON’T FIGHT THE MARKET
Fighting the market is not good for two reasons. First, we lose money. How much
we lose depends on how well we are managing our money and controlling our
risk. Second, fighting the market affects our judgment, and causes us to try to
confirm that our judgment is correct, or persist in fighting a trend so that we will
eventually prove to be correct. We figure that if we persist long enough, no matter
how long it takes, we will eventually be right.
The same can be said for being in a canoe in a river. There is a reason for leaving
your car downstream, launching your canoe upstream, and paddling downstream.
It is much easier and eminently more fun to go with flow and paddle downstream.
We could do the opposite and paddle upstream. Eventually we may even get to
our destination, but the cost would be substantial. It would take much more time,
more physical and emotional stamina, and we would be constantly fighting the
current. Reaching the goal would not be worth the cost.
Even if you ultimately make money fighting the market, it is not worth the price
you have to pay, both financially and with peace of mind.
LET THE MARKET TELL YOU WHAT TO DO AND WHEN
The correct attitude for successful trading is to let the market tell you what to do.
If the market says to go long, buy, and if it starts to go down, sell. This sounds
easy but it is much more difficult than you think. We always like to believe that we
can be in control. We want to be in control of our trading and of the market. If
you accept the notion right now that you cannot control the market, that all you
can control is your execution of trades, you will take a great step toward being a
successful trader.
Instead of trying to control the market, let the market tell you what to do. Let the
market and your strategy take you long rather than you personally trying to predict
or decide when to go long. Let your strategy take you out or get you short. Once
you realize that you can’t understand the market, and that you can’t predict when
the market will move, you will move into that detached state of mind where you
let the market take you where it will when it wants to.
THE MARKET GIVES AND THE MARKET TAKES AWAY
To remove your personal biases and let the market tell you what to do is to give
up control, to give up the notion that you are actually in charge of how much
money you make. For profitable trading, you need to move into the mental state
of letting the market determine the profits, not you. It won’t be whether you
predict the market correctly that determines the profits, but whether your strategy
is in a profitable mode or drawdown mode as determined by the market.
So, let the markets tell you what to do based on your strategy. Let it get you long
and put you short. Let the market determine how much money you are going to
make. Trade your strategy and let the market do the rest. And know that the
market gives money and the market takes away money. Your goal should be to
develop a strategy that gives you more money than it takes away.