Even after trading market for good period of time - the market is still a mystery to me. Why me? It is a mystery to nearly everyone — professionals and so called experts on TV. What is market? The market is the sum total of the wisdom ... and the ignorance...of all of those who deal in it. [All those - human beings...and not machines.] The wisdom of ALL THOSE is driven by emotions of fear and greed; and not rational/logical thinking. That's why market is all about understanding people's behavior and how might people think/behave in different circumstances. Also, the psychology of greed and fear has a tendency to destroy rational thinking when emotions overpower thinking process. That's why when market is in good mood - stock prices start moving to moon and when mood is bad - it can be hammered out of business. I can calculate the motion of heavenly bodies but not the madness of people...Issac Newton. Market has a mind of its own There is a saying that market is moody and you don't know when it's going to do what. Market has a habit of doing the most obvious thing in the least obvious way. That's why trading becomes a difficult job. Sometimes, market does what you expect but not when you expect. Market also does not care what you/experts think. Mr. XYZ thinks market will go up. He gave a very logical explanation. Yet market was down.....Please...market does not read blogs....or listen to experts on TV. It does what it has to do. That's the nature of the market. Remember, market has nothing personal against anyone. Market does not discriminate. It has no personal favorites. Market has a mind of its own, which can be very different from so called expert/logical line of thinking. Understanding Market wisdom/mind = Constructing different scenarios. Since, market is moody, driven by emotions of fear and greed - it always throw up surprises and different scenarios. Hence, it is important for trader not to have any trading bias. Trading is not about predicting what will happen next but developing a game plan for different scenarios. The best way to trade is construct different scenarios and position accordingly when those scenarios play out. It is important to understand that you have no control on what market will do. What is in your control - what you can do when market behaves in a certain way?
The financial markets generally are unpredictable. So that one has to have different scenarios... The idea that you can actually predict what's going to happen contradicts my way of looking at the market....George Soros. Market rewards flexibility. Market rewards contrarians and traders with flexible attitude - one who is willing to accept mistakes on the go and change opinion if market changes its nature. As a trader one should regularly ask - What's the one thing that nobody expects to happen? The best trading move happens in the direction of the surprise. There is a saying that market has a habit of moving in a direction that causes pain to maximum people. The pain is inflicted upon traders who have inflexible attitude. Lots of amateur traders refuse to acknowledge whenever market changes its behavior and rubbish the move as illogical. It only leads to their downfall. Market should never be looked with firm view. Remember, trader has a tendency to trade his belief but market rewards traders who accept mistakes and trade in the direction of disbelief, if market asks them to do so. The lesson - See the market as it is and not as you want it to be. Market is your Boss; and Boss is always right For a trader, there is only one boss and i.e. market. So, one should never try to impose one's views on one's boss i.e. market. The trader's job is to follow the market irrespective of one's beliefs. At times, traders do get carried away and indulge in what is called as revenge trade. Remember, it is easy to get angry at the markets but the consequence of that can be very painful. Market is a ruthless boss and it does not scold you...it just takes money from your pocket. Few losses and all thinking gets blurred...confidence goes for a toss. Despite being ruthless, market does not hate anyone. Market is very fair and does not discriminate one on past behavior. There is only one way you can win the heart of market - Accept - Market is always right....There is no harm in being skeptical about the market, but don’t dare to go against the market.
The financial markets generally are unpredictable. So that one has to have different scenarios... The idea that you can actually predict what's going to happen contradicts my way of looking at the market....George Soros. Market rewards flexibility. Market rewards contrarians and traders with flexible attitude - one who is willing to accept mistakes on the go and change opinion if market changes its nature. As a trader one should regularly ask - What's the one thing that nobody expects to happen? The best trading move happens in the direction of the surprise. There is a saying that market has a habit of moving in a direction that causes pain to maximum people. The pain is inflicted upon traders who have inflexible attitude. Lots of amateur traders refuse to acknowledge whenever market changes its behavior and rubbish the move as illogical. It only leads to their downfall. Market should never be looked with firm view. Remember, trader has a tendency to trade his belief but market rewards traders who accept mistakes and trade in the direction of disbelief, if market asks them to do so. The lesson - See the market as it is and not as you want it to be. Market is your Boss; and Boss is always right For a trader, there is only one boss and i.e. market. So, one should never try to impose one's views on one's boss i.e. market. The trader's job is to follow the market irrespective of one's beliefs. At times, traders do get carried away and indulge in what is called as revenge trade. Remember, it is easy to get angry at the markets but the consequence of that can be very painful. Market is a ruthless boss and it does not scold you...it just takes money from your pocket. Few losses and all thinking gets blurred...confidence goes for a toss. Despite being ruthless, market does not hate anyone. Market is very fair and does not discriminate one on past behavior. There is only one way you can win the heart of market - Accept - Market is always right....There is no harm in being skeptical about the market, but don’t dare to go against the market.