Last time I made some precious conclusions about how to utilize Dynamic trading in profitable trading strategy. Although there is a difference between trading and making forecasts, it is not quite obvious. That’s why I’m going to explain things once again.
Forecasting by technical analysis methodology is concerned with using historic data in order trader to be able to predict future prices or market behavior in terms of pattern kind. The aim is identifying a place in the future where trader could put on a reasonable trade or where to exit a trade with an acceptable profit. This is a risky job.
Making forecast, trader already has an expectation about next market activity. This expectation often goes into a conviction. And here is the first mistake. The first trading rule is broken. Traders can afford to have an opinion about market activity, but they must not be convinced. It is best said by John Keynes:
“The market can stay irrational longer than you can stay solvent”.
My trading experience proves that forecasting has nothing to do with trading. Everyone who tries to trade his or her forecast by means of technical analysis takes huge risk to suffer many unsuccessful trades. It turns out that forecasting is for academic experts and non-trading analysts. Traders use technical analysis to collect practical information which helps to spot places at timeline where probability favors greatest opportunity for taking trading profit.
Dynamic trading uses particular technical analysis methodology and its objective is measuring current price position in regard to recent market activity.
It isn’t wise taking action before the events. Only market behavior must leads taking trading decisions. Trading rule number two describes all of this: trade market behavior, not forecast.
It is crucial trader to cope with his or her greed and ego in order to carry out trading task by taking rational decisions but not emotional ones. Trading success doesn’t depend on well done forecasting. It’s a question of disciplined execution of a good trading plan.
Unfortunately, no one can tell in advance with certainty when the market will offer a trading opportunity. It could be difficult presenting my trading strategy live on the blog. So I’m going to describe trades post facto.
