Trade The Journey

Trade The Journey

Thinking Pt. 1: What’s Next!

Greetings and Happy Holidays!

The holidays are a time for reflection and thankfulness. These times also mark the beginning of expanding waistlines and credit accounts, so be mindful.

While out on the morning run, I had to remind myself to be mindful. A couple of weeks ago, I lost my phone, and I almost made the same mistake twice. Purchasing a new phone is no easy task these days with all the so-called deals and payment plans available.

But I digress.

I didn’t lose the phone, nor did I misplace it. The phone was beneath my car sheet cover, so maybe I should have looked around better before I panicked.

I decided to name this series of posts “Think” because I often forget to do so. Not in the traditional sense of having thoughts but in the spirit of critical thinking.

 

Critical thinking is vital in every aspect of your life.

During your career, participating in the market and in your everyday life, critical thinking keeps you one step ahead.

Critical thinking means several things to me — the ability to make the best-educated guess and forecasting the likely sequence of what could happen next.

Trading has helped me to sharpen my critical thinking skills. But first, I have to be able to see what the problem is before me. Seeing the reality of the situation is the first step. Initially, this is the hardest part to master, seeing what’s there, not what you want to be there.

With over 500 simulated trades, you begin to see patterns in the way you trade but, more importantly, patterns in the way you see things. It took some time to see the difference between the two when trading. At times I have to remind myself to be as objective as possible even though that is impossible.

We’d have to know everything that happened the split second before to be as objective as possible now.

 

*(My journal has helped me tremendously because it allows me to review what happened. Over time, I have learned that I best learn by writing things down. I am a kinesthetic learner.)

 

I would see what I thought was a bullish candle or small trend and try to hop on what I thought was a bullish stampede. Often it turned out to be a small rush with a massive bearish turn.

At first, it may seem like I made the wrong forecast which is true. The real problem was what I thought I saw, which was a bullish trend. This belief also led me to believe that the bearish turn would be shortlived, which was a big mistake. I stayed in the position anticipating a turn of events that never happened.

The quality of your foresight is based on what you see. Now before you stop and center your vision on the chart, what about the price action?

Is the depth of the price movement causing the trend to slow before it appears on the chart?

The trader that can form the most accurate picture of where the stock is now has a better chance of forecasting what may happen next!

 

The price movement – charts – indicators is the order in which I now have begun to process a forecast.

Within this process is “Critical Thinking.”

Now come the tricky part and the second half of critical thinking. What is going to happen next?

You nor I know exactly what will happen next, but based on what I saw, the price rise was not supported by depth or volume. It was most likely to fall to its previous support point and it did.

 

Lucky guess or an educated guess?

We have no way of knowing what will happen; we make a short plan based on the two directions. Set a stop below and monitor where you can get out when above. Of course, the process of doing this is a bit more involved, but you get the picture! Right?

The reason for starting this “think” series is to remind me that I/you should always be thinking!

Nowhere is this more self-evident than in the market.

Thoughts? Corrections? Suggestions?

Leave a Comment

Your email address will not be published. Required fields are marked *