Beliefs, anticipation and failure

What you think you know about the markets can become the worst enemy of your trading. One of the biggest obstacles a trader has to fight against is the series of strong beliefs that are deeply ingrained in our minds throughout our common education in real life. Especially those that relate to the need of being right, the almighty power of knowledge and the social stigma of experiencing losses.

Knowledge can sometimes be as dangerous as ignorance. We strive to accumulate a series of formulas, precise calculations, indicators, systems and patterns which we think erroneously will give us the key to the Holy Grail. Then we look at the charts and start seeing things that are not there, because we tend to superimpose on them all those “models by the book”, those perfect patterns we have studied in detail and observed so many times in hindsight when back-testing. We start to predict and anticipate upon a hint, we become impatient and do not realize that in fact what we are seeing is just an illusion, a possibility which hasn’t yet been confirmed and we jump eyes closed into a trade to be ahead of the expected move and not miss a single pip… just to see then that the market this time didn’t complete the pattern and decided to go in the opposite direction.

All the knowledge we may have gathered about a particular market behavior is only based on a relative recurrence of previous events, it is all history, it is not here and now. If you try to see beyond what is really happening in the moment, because it seems to look like something else that happened in the past, you are out of phase with the real-time price action, you can be deluded, you are not in the Zone anymore.

What you learn has to serve as a guide, like a general and hypothetical map of an unknown territory. You can plan your moves in detail for several possible alternatives, but none of them will be confirmed until the price action itself proves this or that option to be the most accurate. Of course, this means that you need to develop patience and direct observation, without trying to out-guess what is going to happen on the next candle. This will also means that most probably you won’t be able to take to the bank the whole moves from start to end. Neither will you be picking tops and bottoms, nor figuring out in your imagination the rest of the pattern that hasn’t yet fully emerged.

Knowledge or past experience is an effective tool if it allows you to be prepared in front of an almost unpredictable series of events. Knowledge of the markets allows you to know that you don’t know and that anything could happen, and be able to BE there and see WHAT it is and WHEN it happens and take immediate action. Don’t let your knowledge become a belief.