What We Trade
It is very easy to think that we trade the chart or the probabilities – but in fact we trade against other people’s choices in response to the price movement.
It is then easy to say “well how do I tell the difference?” Ask yourself the question “what is everyone else doing given what has happened in the most recent timeframe that I trade.” In fact, go further and write an short essay about who you are trading against. Once you have a visual in your mind, it becomes easier to avoid getting caught up at the worst kind of moments in market action.
Tags: Markets, trading psychology
You suggest writing about who’s on the other side of our trades so here’s my peculiar vision: I imagine angry dwarves, dressed in red and green like the candles in my chart, shaking their fists at each other, waving their little hammers and waggling their beards, bristling with fury as they are stopped out again and again. When I am trading well, I soar above this sea of comically dressed choleric gnomes, cooly laughing at their anguish, their misplaced belief in the wrong kind of hard work, as I profit from their stops and see them in my mind’s eye squealing and clenching their fists in rage. But at my worst I am one of them, hunched and furious, unable to see past my quivering inadequacy and limitations, my mind numbed by their chatter as I shrink to their level. Now, at least, I know that when I become that beastly little creature, it’s time to leave my charts and take the rest of the day or even the week off.