TRADING RULES: STRATEGIES FOR SUCCESS
A great excerpt from “Trading Rules: Strategies for
Success” by William Eng. It’s a great reminder that market prediction is a
fool’s errand:
When you buy something, you want it to go up. When you
sell something, you want it to go down. The chance of entering the trade
correctly is small, but the chance of exiting the trade correctly is smaller.
The chance of being right on both entering and exiting
is the smallest. With such diminishing odds of coming through with a completely
correct and, therefore, profitable trading campaign, the fewer decisions you
make in the markets, the more profitable your trading should be. How many people actually get to sell at the top or buy
at the bottom?
At most, a handful in each reversal area. First, you
must be a market follower, once the market has told you want it wants to do. If
the market is a raging bull, you have no alternative but to buy.
If it is bearish, you have no alternative but to sell
every time you get the opportunity. Let the market tell you what to do. To do
otherwise is to try to control the markets-something that is only reserved for
God and natural disasters.
Secondly, selling at the top and buying at the bottom
does not guarantee profits. How many times have you heard of traders who
managed to sell near the highs or buy near the bottoms, only to miss the
ensuing move completely.
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