Not so in trading. In trading facts don’t matter at all. There is nothing more amusing than watching an earnest well reasoned analyst provide a thorough factual argument for his position only watch that position lose money day after day after day. This is such a common occurrence across all asset classes that almost every investor makes the same mistake.
The reason is simple. In financial markets we don’t trade facts, we trade feelings. And feelings as every parent of a teenager knows, can change on a dime. That’s why when you approach financial markets you must never allow facts to get in the way of making you money. As the great Richard Pryor once said, “Who you gonna believe? Me or your lying eyes?”
It is incredibly easy to get married to your thesis when you trade. After all in real life we are taught to stick to our guns, to hold our convictions, especially when we have the facts on our side. But trading is not real life. In fact it is often the opposite. In real life we are taught to be industrious, faithful and reflective. In trading it helps to be mercenary, promiscuous and instinctive.
In trading nobody cares if you were right about US NFP figures. Nobody cares if your US growth thesis was correct. The only thing that matters in the end is whether your analysis led to a profitable trade. If it did, good job. If it didn’t change your analysis -- don’t try to change the market. As I have said a million times when price disagrees with the news -trust price.
Remember in the financial market you can be 100% intellectually correct and still lose all of your money. That’s because in trading you only make money when the market -- not the facts -- agree with you. To win in trading never let facts stand in the way of feelings. And remember, this ain’t real life, its just trading.
Editors’ Picks
AUD/USD: The hunt for the 0.7000 hurdle
AUD/USD quickly left behind Wednesday’s strong pullback and rose markedly past the 0.6900 barrier on Thursday, boosted by news of fresh stimulus in China as well as renewed weakness in the US Dollar.
EUR/USD refocuses its attention to 1.1200 and above
Rising appetite for the risk-associated assets, the offered stance in the Greenback and Chinese stimulus all contributed to the resurgence of the upside momentum in EUR/USD, which managed to retest the 1.1190 zone on Thursday.
Gold holding at higher ground at around $2,670
Gold breaks to new high of $2,673 on Thursday. Falling interest rates globally, intensifying geopolitical conflicts and heightened Fed easing bets are the main factors.
Bitcoin displays bullish signals amid supportive macroeconomic developments and growing institutional demand
Bitcoin (BTC) trades slightly up, around $64,000 on Thursday, following a rejection from the upper consolidation level of $64,700 the previous day. BTC’s price has been consolidating between $62,000 and $64,700 for the past week.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
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