THE CURRENT MARKET DEMANDS THAT YOU SHELVE YOUR BRAIN
The single biggest killer of traders and investors is the subjective nature of analysis in the financial markets. There is no such thing as consistency of analysis. Every system of trading, be it fundamental or technical, will face a period of time when it will be tested by the markets.
Knowing when to toss a method of trading into the trash and when to dig your heels in, sticking to a certain method, can only be learned through the minutes, hours, weeks and years you put into this endeavor. Even then you will still be subject to the inevitable periods of equity drawdowns that eventually will have you questioning yourself.
I bring this up tonight because it seems that a lot of traders still have a rangebound mentality despite the fact that we are now in a trending market. In fact, most of the articles I read and comments I observe are born out of a mentality that has come to believe that markets will forever be choppy. Therefore, if the market goes up X%, it must come down X%.
What trending markets tend to do is to reconfigure the ranges that market participants have become accustomed to associating with overbought or oversold, excessive bullish or bearish sentiment, overvalued or undervalued. A range expansion in indicators tends to take place. While that range expansion is taking place, those indicators are useless.
All the meanwhile, traders continue to cling onto those indicators without taking into account the fact that they have become irrelevant as a result of the trending nature of the market. During strong trends that is the only thing that matters. By that I mean the strong trend becomes the be all and end all. There is no analysis needed. It's a trend...and your job is to ride it to its fullest potential.
It is true that the most ignorant of investors can make the most money during strong trends, especially bull trends. This is because they lack the knowledge to be able to assess the markets properly. They are not able to get in their own way with analysis that isn't compatible with trending markets. Yes, indeed, ignorance can be bliss and it can make you money if the conditions are right.
A majority of this year will be a time to put the magnifying glass away professor and walk with the deaf, dumb and blind.
Your brain is your enemy.
