but it is reasonably similar to a reliable setup, it will likely behave similarly
as well. Close is usually close enough. If something resembles a textbook
setup, the trade will likely unfold similarly to the trade from the textbook
setup. This is the art of trading, and it takes years to become good at trading
in the gray zone. Everyone wants concrete, clear rules, or indicators,
and chat rooms, newsletters, hotlines, or tutors that will tell them when
exactly to get in to minimize risk and maximize profit, but none of it works
in the long run. You have to take responsibility for your decisions, but you
first have to learn how to make them, and that means that you have to get
used to operating in the gray fog. Nothing is ever as clear as black and
white, and I have been doing this long enough to appreciate that anything,
no matter how unlikely, can and will happen. It's like quantum physics. Every
conceivable event has a probability, and so do events that you have yet
to consider. It is not emotional, and the reasons why something happens
are irrelevant. Watching to see if the Feds cut rates today is a waste of time
because there is both a bullish and bearish interpretation of anything that
they do. What is key is to see what the market does, not what the Fed does.
Never watch the news during the trading day. If you want to know what
a news event means, the chart in front of you will tell you. If a pundit on
CNBC announces that a report was bearish and the market goes up, are
you going to look to short? Only look at the chart, and it will tell you what
you need to know. The chart is what will give you money or take money
from you, so it is the only thing that you should ever consider when trading.
If you are on the floor, you can't even trust what your best friend is
doing. He might be offering a lot of orange juice calls but secretly having
a broker looking to buy 10 times as many below the market. Your friend
is just trying to create a panic to drive the market down so he can load up
through a surrogate at a much better price.
There is one other problem with the news. Invariably when the market
makes a huge move, the reporters will find some confident, convincing
expert who predicted it and interview him, leading the viewers to believe
that this pundit has an uncanny ability to predict the market, despite the
untold reality that this same pundit has been wrong in his last 10 predictions.
The pundit then makes some future prediction, and the naive viewer
will attach significance to it and let it affect his trading. What the viewer
may not realize is that some pundits are bullish 100 percent of the time and
others are bearish 100 percent of the time, and still others just swing for
the fences all of the time and make outrageous predictions. The reporter
just rushes to the one who is consistent with the day's news, which is totally
useless to a trader. In fact it is destructive because it can influence his
trading and make him question and deviate from his own methods. So, if
you really must watch TV during the trading day, I recommend cartoons
or foreign language shows, so there will be no chance that the show will
influence your trading.