November 17th, 2020
When last we spoke I mentioned that I would have some wise words with respect to the prognostications of experts and headlines in general as they relate to trading.
There have been views – maybe countless – as to which winner of the interminable U.S. election will have what effect on the markets. Honestly, if you are an investor or trader, you shouldn’t care.
One of the arrows in the quiver of a consistent trader ( and I include investors who believe themselves to be different and superior because they are taking a longer view) is process.
It is at times like this that it becomes your saving grace, your anchor. Process keeps you on the straight and narrow. It stops you from doing things that “feels right” at the time.
I can tell you that even the most seasoned trader who should have learned his lesson will still wander into the quagmire of doing something that later he will beat himself up for: indulging his emotions.
Experts have views on the price of this or that because they are experts. When someone asks them where they think the price of gold is going they better have an opinion if they want to retain the title of “expert”.
I learned a bit about experts a number of years ago when an expert expressed a view as to why the price of oil had fallen that day. The very next day he was asked why he thought oil had risen on that day, he expressed the same reason.
The real reason, as a trader, you should not be paying any attention to experts or headlines is that you have no idea how much of that information has already been priced into whatever.
The market is a giant, living, breathing thing (don’t worry, it is not under your bed). It takes information and assimilates it based on all the emotions you can think of and expresses its view in the price – the final arbiter.
Don’t look to logic to help you. It has no place in the markets; no place in trading.
Headline: “Gold is going to $3,000”. What are you going to with that information? Go out and buy gold toute de suite (that’s French for toute de suite). Think of the average person who did so. They are not as lucky as you and are following a process. They see gold doing this or that and don’t whether to stay or go because they got in without reason that made any sense.
Don’t be that trader or investor.
If you want help with your process, drop me a line: firstname.lastname@example.org.