I’m disgusted by all the clowns out there with guru status who have very popular websites where they talk economics, politics, etc. And then they make the allegedly seamless transition right into their “predictions” of where markets are headed. My repugnance, however, is specifically aimed at the ones who have been wrong for years and years. I can’t fathom why folks keep listening to them. They may be brilliant at economics, etc. and they’re very likely much smarter than I, but what they don’t have (apparently) is any working knowledge about how markets actually operate in the real world. Not in their fantasy world (market-wise) of academia and high IQs. Markets are markets, that’s it – nothing magical. And nothing that difficult. (Of course it takes ten years to figure it out.) Markets move on one thing only – LIQUIDITY FLOW/SUPPLY vs. DEMAND. Why in the world do people continue to waste their precious time on all of the total crap out there in lieu of focusing like a laser beam on how to learn, understand, and totally respect LIQUIDITY FLOW? All of the other nonsense (from a success in markets viewpoint only), is basically noise. When a market is ready to turn – when the transfer from weak hands to strong hands at bottoms (ACCUMULATION) or the transfer from strong hands to weak hands at tops (DISTRIBUTION) is nearing an “end” – none of the big picture economic, political, etc. “knowledge” that we have is going to help us one bit. When the market is ready to move, it’s going to move. Period.
Success in any tough, competitive endeavor requires a devotion to filter out noise. It’s too easy to get off track, especially when the bombs are exploding all around you – meaning, for example: market volatility (when it’s likely to actually be the lowest RISK time/price to enter the market); or shooting free throws in a visiting stadium; or facing a pitcher with a 95 MPH fastball with great movement to it. So allowing yourself to even entertain “noise” in the situations where you have to let “instinct” (experience, subconscious learning, constant practice, planning, strategy, educated anticipation) guide you, will greatly reduce the probability of success.
So is it that people don’t want to be successful, and/or don’t know how to be successful and/or don’t have the drive, passion, work ethic to be successful? And by success, I’m referring to what any individual deems that to be. But successful means relatively better, so to speak. Any level greater than average is successful – how much does it mean to you? Basically none of us will be Jimi Hendrix, Walter Payton, Ty Cobb, or Jesse Livermore. But if one wants to feel the pride of doing a “good” job, then why not spend your total focus on how to achieve those ends. The most important focus should be on a “perfect” entry point into a market. We have ZERO control over what happens with the market once we are in. We only have control over when/where we get in and when/where we get out (profit or loss). That is it. (Actually when we really screw up, the broker has control over when we get out.) So initially all of our attention should geared be towards the great entry point.
After that then work on trade management once you’re in. How many of you have even heard of trade management? You see how we’re “learning” all of the wrong things about markets. Excellent trade management skills are mainly about two things – humility and greed. A great trader learns how to reverse those emotions, but only at at the appropriate time, of course. Meaning, for example, when a market has been soaring for awhile, and the crowd is greedy, it’s, at a minimum, prudent to consider taking partial profits. But how greedy is too greedy. Greed can persist for quite awhile (in market terms vis-á-vis time and price). That’s when understanding the internal technical condition of the market can very much help with the timing. And the ongoing time frame confusion that most of us face when we’re involved with markets usually plays a factor in this. However, don’t be cute and don’t be Mr. Smartypants about taking at least partial profits. Myself, if I even feel a twinge of greed, combined with a great market to sell into (a strong price rally), I will put in a market order to take at least partial profits. It’s amazing how many times in this type of situation that I have had my market sell orders filled substantially above where the market was when I initially entered the order. It is a big confidence, NOT EGO, builder. And you can then add that to your brain’s C:/ drive. And then access your stored data and keep repeating it when that situation arises again. But just be aware, since the “market” loves to confuse us – these situations never repeat exactly.
An example of massive, blatant greed is the bubble in silver in April 2011. The chart of silver (SLV) is shown below. And to all of the silver permabulls (being a permabull or permabear on any market is extremely dangerous) whom I have argued with for years about the supposed bubble in the stock market and imminent crash, right there was actually that exact situation and an incredibly beautifully magnificent market to SELL into right in front of their noses. Yet many folks back then deemed it to be a great buying opportunity. And many of those folks are still arguing with me about the bubble/crash scenario. However, most of you know that even though I don’t believe in the bubble/crash scenario, I absolutely would not buy the general stock market currently. The RISK currently in being long stocks as an INVESTMENT is substantial. Large sell offs in markets are normal. That does not equate to a crash.
So ,the point is we need to rein in our emotions ALWAYS when dealing with markets. Don’t get euphoric during the good times and also keep your wits about you during the losing times that we all experience.
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