A friend e-mailed me not so long ago....since it discussed a very interesting point, i chose to post it to this blog. Hope this post can makes us have another point of view. Here's the attachment:
Picking tops and bottoms has gained huge popularity over the past 30 years. I recently received an advertisement that proclaimed 100% accuracy in picking tops and bottoms (pivot points) in the S&P 500, down to the minute. I could not hit the order button fast enough. This is what I have been searching for ever since my trading first began 21 years ago. My heart was pounding, my palms were sweating and my dog was barking. I was about to cash in on the secret of all trading secrets!
Riiiiiiiiiiiiiiiiiiiiiight.
Actually, I would have hit the order button just for the pure entertainment value, but it was $5k. So I emailed him. What did I email him? "Are you trading it yourself"? Never got a reply.
Don't get me wrong, there is nothing wrong with trading systems that attempt to pick tops and bottoms using technical analysis. The problem is usually the trader implementing the strategy. More times than not, they have failed to properly prepare themselves for the risks involved and the realistic expectations of performance. Claiming 100% accuracy to the minute certainly doesn't help encourage the need for such preparation.
However, I did not want to spend this email on picking tops and bottoms as a strategy. I want to take a few minutes to reveal to you a very disastrous practice common to many traders who do not even realize they are doing it. It is one thing to pick tops and bottoms using a technical analysis strategy of some sort... it is an entirely different thing to pick tops and bottoms because you are in a position and are hoping that it won't go any higher, or lower.
I was recently talking with a trader who made the statement "Wheat can't go any higher". That was when it was below 800 just a few short days ago. Uh oh. I knew immediately this trader had a position on that would get nasty if wheat did go above 800. This trader was picking a top in a market, not because it was part of some well thought out, back tested strategy, but because he was biased for the top to come in at 800. It was 100%, pure, unadulterated bias. He was relegating his success to blind hope.
The word "can't" is a very strong word. When this word pops up because someone is in a position that he has not prepared to move beyond a certain point, not only can the market move beyond that certain level, it almost assuredly will. Even if it doesn't the first few times it happens, the trader then gets bold about what he is doing and starts using that nasty word on a frequent basis... it is only a matter of time before this road leads to ultimate disaster.
It is hard enough to prepare for the risks of picking tops and bottoms in markets using careful analysis. Picking tops and bottoms because of 100% pure, unadulterated biases is disaster in the making.
Hope You Enjoy this Post. To Ryan Jones, Thx for the e-mail, and many more that u've sent 2 me before. It really changed my point of view. Good Luck Everybody...
Picking tops and bottoms has gained huge popularity over the past 30 years. I recently received an advertisement that proclaimed 100% accuracy in picking tops and bottoms (pivot points) in the S&P 500, down to the minute. I could not hit the order button fast enough. This is what I have been searching for ever since my trading first began 21 years ago. My heart was pounding, my palms were sweating and my dog was barking. I was about to cash in on the secret of all trading secrets!
Riiiiiiiiiiiiiiiiiiiiiight.
Actually, I would have hit the order button just for the pure entertainment value, but it was $5k. So I emailed him. What did I email him? "Are you trading it yourself"? Never got a reply.
Don't get me wrong, there is nothing wrong with trading systems that attempt to pick tops and bottoms using technical analysis. The problem is usually the trader implementing the strategy. More times than not, they have failed to properly prepare themselves for the risks involved and the realistic expectations of performance. Claiming 100% accuracy to the minute certainly doesn't help encourage the need for such preparation.
However, I did not want to spend this email on picking tops and bottoms as a strategy. I want to take a few minutes to reveal to you a very disastrous practice common to many traders who do not even realize they are doing it. It is one thing to pick tops and bottoms using a technical analysis strategy of some sort... it is an entirely different thing to pick tops and bottoms because you are in a position and are hoping that it won't go any higher, or lower.
I was recently talking with a trader who made the statement "Wheat can't go any higher". That was when it was below 800 just a few short days ago. Uh oh. I knew immediately this trader had a position on that would get nasty if wheat did go above 800. This trader was picking a top in a market, not because it was part of some well thought out, back tested strategy, but because he was biased for the top to come in at 800. It was 100%, pure, unadulterated bias. He was relegating his success to blind hope.
The word "can't" is a very strong word. When this word pops up because someone is in a position that he has not prepared to move beyond a certain point, not only can the market move beyond that certain level, it almost assuredly will. Even if it doesn't the first few times it happens, the trader then gets bold about what he is doing and starts using that nasty word on a frequent basis... it is only a matter of time before this road leads to ultimate disaster.
It is hard enough to prepare for the risks of picking tops and bottoms in markets using careful analysis. Picking tops and bottoms because of 100% pure, unadulterated biases is disaster in the making.
Hope You Enjoy this Post. To Ryan Jones, Thx for the e-mail, and many more that u've sent 2 me before. It really changed my point of view. Good Luck Everybody...
No comments:
Post a Comment