Trade The Journey

Trade The Journey

What is your Perspective?

Top of the top.

I hope everyone is safe and secure during these uncertain times. Another week of current events that add no levity to the stress people are facing. Every week it seems as if we venture further down the rabbit hole.

I like everyone else, I receive Facebook and Instagram alerts detailing the latest conspiracy theory. In the past, I would have believed every warning to be valid as if I had a direct line to the government’s plans. Everyone circulates these plans, and the next thing you know, this theory becomes the center of dinner conversation.

Now, I look at these theories as nothing more than engaging stories. As I began to deepen my knowledge of monetary policies and economics, the truth became stranger than fiction.

To be fair, some rumors turn out to be correct, but more often than not, they aren’t. Unfortunately, the general public is usually in the dark and the last to know about significant events. Most of the seemingly insignificant news that occurs throughout the world and domestically never makes it on the average person’s television screen.

The most trivial events are often the causation that triggers major events to transpire. For example, the prevailing notion among the general public is that the Coronavirus caused this recession. Of course, this is a generally true statement. The truth is that the United States was in a history-making bull run and over-leveraging itself beyond safety.

Those in the know knew something significant was on the horizon. In April 2020, the Fed added over a trillion dollars to the commercial paper market.

“Commercial paper markets directly finance a wide range of economic activity, supplying credit and funding for auto loans and mortgages as well as liquidity to meet the operational needs of a variety of companies.”

Banks were no longer eager to provide the needed liquidity for the businesses to function and borrow for short-term needs. Going back even further, we saw that the yield curve inverted in 2019. Without getting into the details of how and why this occurs, the general idea is that it can signal a coming recession.

 

Some might say that stuff is boring, and I have no interest in learning about it. Fair Enough!

It should also be fair for your financial future to be at the whim of the dice. Going forward because past experience is a new lesson, what can we do?

I believe that the only control we have and mostly need is that of ourselves. To do this, we may have to adjust our perspective. Is this a crisis and opportunity?

Perspective is everything because it dictates what you think and how you act. It influences how you see and what you see. To give you an example, my perspective on trading has gone through several changes.

When I first opened my thinkorswim platform, my perspective regarding trading was that this experience would become quickly profitable. I began paper trading, and almost instantly, my account was in the red. My perspective didn’t include probabilities or risk management, it only included becoming profitable quickly.

I believed I could predict the direction of the next bar and risk abnormally large amounts on this certainty. Trading became a source of frustration and anger. I’d complete a few profitable trades and instantly believe I was a trading wizard.

 

Thank God this was a paper account.

 

My perspective changed when I begin listening to Mark Douglas’s, How to think like a professional trader. His lectures altered the way I viewed trading. Instead of viewing trading over a crystal ball, I watched for price patterns to indicate where the price may be going. Whether the trend was up, down, or sideways, I watched and traded in the direction of the pattern.

Sometimes I was right, and other times I was wrong. Now that my perspective is evolving to match what trading is, I have no problem closing my position. One of my favorite quotes is, “A profitable trader is a master of risk management.”

I gave up on trying to predict with certainty the next direction. I’m not a surfer, but I would liken the process of trading to surfing. You’re trying to catch the next move and ride the move profitability for as long as possible.

Sure, you’ll miss some waves, but that’s okay because there’s always another wave forming.

 

Perspective before:
I can predict the movement of the next bar. The process of trading will become profitable quickly. I’m willing to hold a position because I believe that I am right and things will turn in my favor. Trading will become easy. Perspective Now:
I cannot predict the movement of the next bar or the ultimate direction of the price movement. I no longer need to. Because I have developed my risk management skills, I no longer need to suffer a substantial loss to tell me the position was flawed. Since I am able to keep my head above water, the next wave of profitability might be coming my way. Trading will become natural.

 

As you can see, those are two entirely different perspectives. As in trading so in life. Perspective is everything, and it can create a heaven or hell for you to live. Shifting your perspective can cause you to see things right in front of you that escaped your vision for years.

With this new information, you can change how you react to a newly discovered variable. The root of changing is acquiring new knowledge.


This week in Review:

This past week brought about mixed feelings. On the one hand, I feel the effects of the recession first-hand, and on the other, I am glad I’m prepared. The impact of this recession is wide-spread, with some calling it the beginning of a global depression. Most countries have been increasing their debt to support their citizens. Now governments are seeming more hesitant to do so.

Now is the time to save. It may even be time to use what you have saved. Thinking that I might have to spend my savings to survive this crisis has made me feel angry and resentful. To avoid these feelings, I continually have to readjust my perspective to include gratitude.

Gratitude is a new alteration to my perspective.

This past week deserves the grade of “B+” for navigating the waters of uncertainty with calmness and composure.

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