Over many years of trading, I’ve found certain principles to be true. Whenever I find myself under stress, when market whipsaw me, I pull out these basic trading principles and review them.
Don’t Try to Predict the Future
When I started trading I used to think that there were experts and geniuses out there who knew what was going to happen in the markets. I thought that these traders and market gurus were successful because they had figured out how to predict the markets. The hard truth about trading is Predict and Perish. As a trader I will make money when I take trade as per my trading system not when I predict what is going to happen in future. It might happen, It might not happen, but if you get in vicious circle of prediction and trading you will be never able to succeed in long term. Its your discipline and risk management which will decide your fate as trader.
No one knows where the market is going
It took me a long time to figure out that no one really understands why the market does what it does or where it’s going. Instead of wasting our energy and time on next BIG move, start focusing on what you will do when market moves in that direction, Prepare your plan strategy for trading the next move, but do not try to double guess IT SHOULD HAPPEN, market is a wild elephant it will move where it wants to. We as trader should be able to participate in that move not standing against it.
No one knows when the market will move
It also has taken me a long time to understand that no one knows when the market will move. Take recent example On 24 June Nifty made low of 7927 but the ferocity of move till 8500 has taken all the traders by surprise. Now if a trader wants to time market will mostly miss the move, but if you work on your trading strategy you could hav easily captured part of the move. My frustration level declined dramatically, and I was at peace knowing that it was OK not to be able to predict or understand the markets.