A short one for the next couple of issues: I have a few personal issues that are consuming my time.

In my ten or so years with Dr. George Lianos, one of the aspects of success that he illuminated was the degree to which long-term success was tied to constant honesty. Even that idea took a while to sink through my defenses. I pride myself on keeping my word to myself and to others; this necessarily, I thought, meant that I was always honest.

It was only after a time that I found George was correct. Being human means being dishonest, to a greater or lesser extent. Our job is to minimize the dishonesty as much as possible.

Dishonesty is one of the ego’s main defenses: its first reaction is always to view our acts from our perspective e.g. “I’m not really lying, after all it’s just a white lie”.  And usually we are dishonest to save some aspect of the ego e.g. our pride.

While we may get away with it outside the realm of trading, within the trading universe, being dishonest may be just a small step away from disaster.  Trading demands we be as honest as we can possibly be: we need to be open to the signals the market provides whether or not they accord with our opinion.

My entry last night in the S&P (see video) is classically a case in question. I made a mistake in my entry: I  mistook the September levels for the June levels and entered at the incorrect price (Figure 1) There was in fact no move below the Primary Sell Zone, let alone acceptance.

In addition when I looked at the Normalised Volume; it was lower than the small range day on June 2 (Figure 2).  This suggested all that happened on June 3 was long liquidation. Long liquidation is a precursor to a rally not to a move down.

On the other hand,  Market Delta volume showed the preponderance of selling (Figure 3). So, I reasoned that, given the focus on Non-Farm Payrolls tomorrow, we should see rotational day on June 4; I expect the range to be bounded by 935 to 933 on the top side and 919 to 923 on the bottom.

Rather than hang on to  the trade just because I was in it, I placed orders to exit the position. Sure, tomorrow’s Non-Farm may validate the trade but then again it may not. In any event, the fact is, I entered on an error; and, as I see it, the only proper course is to exit.

FIGURE 1 S&P  Primary Sell Zone

FIGURE 2 Normalised Volume

FIGURE 3 Market Delta Volume

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