Stop Being A Rebel, Swim Downstream

Looking back on my first trade I ever made with real money, I had the right idea. I bought the Canadian Dollar against the US Dollar in July of 2007. Why did I take this trade? Well because the US Dollar's value fell for weeks and each day it kept moving lower and lower. Naturally I looked at the market and simply followed the crowd. Before I knew it my account was up just under 200%. I was flying high but then the market turned on me eventually and not only did I lose the profit I felt I had made, I also lost more than 70% of my original capital. I can smile about it now but it wasn't fun at the time. What I lacked was any sort of exit strategy or knowledge on how to protect myself. The point is, the trend was clear and I just followed it and for a short while, it paid off. I was effectively listening to the market.

If I were standing on the side of a stream in a forest and I threw a twig in the water and closed my eyes for a minute or so, when I open my eyes should I expect to find that twig somewhere upstream? Of course not. That would be crazy right? But traders do this very often and that's why over time, all they're left with is little to no money. They look at the "stream" and say, I'm going to outsmart it. All they end up doing is getting hurt, even when mother nature herself screams... "I'm not going that way!".

The whole notion of buy low, sell high should die a horrible death in the world of trading. This will have you sitting on the sidelines waiting for the right opportunity to get in the game while the market makes its move and continues in one direction without looking back. It's those moves that are your bread and butter. Sure you will take losses when the market gets choppy but if you can minimize your exposure and are patient, those big moves (which statistically happen only 20% of the time), will greatly increase the value of your trading account. This is why when the market is choppy and moving no where, I typically take small loses and have small wins that generally break even, sometimes what seem like forever. When the market begins to resume its volatility again and makes those big moves, that's when it almost seems as if money is being printed.

Don't fight the obvious. Simplify your trading and be a good follower. It pays off in the end.