BarroMetrics Views: We Trade Our Beliefs

One of the most lessons I learned  about trading came from a philosopher and not a trader, Ayn Rand. Nathaniel Branden in his NBI series of lectures on Objectivism once said something like this: There is an external reality but our reality is the ‘out there as seen by the in here’.

I heard those words on tape about the same time I took Pete Steidlmayer’s first course on Market Profile. At the time, I was struggling with my trading. But, that view, with what I learned from Pete, turned my trading around.

The one certainty about trading is the future is uncertain. No matter how we may wish it otherwise, and despite all the claims of some sections of our industry to the contrary, that is the way it is. As traders, we need to recognise this if we are to do well.

There are many ways to handle this reality. I followed Pete’s method of having scenarios in my hand and of what should or should not happen. Then I act based on the feedback the market gives me. An example of what I mean occurred on Sept 27. I had been looking for the S&P to rise to 1231 (or so) on the cycle date due Oct 3 to Oct 6. But, the market had started to act as if it wanted to go down. Finally, on Sept 28, based on a ‘death zone’ setup, and the ‘open-gap’ rule, I took a full size short position. ‘d preferred to go ‘double normal size’ but the loss would have been too big if the market proved me  incorrect.

I took the shorts partially because the S&P was not behaving like a market that wanted to rally; and. if my view that a top should occur around Oct 3, I believe we’d have seen more upside momentum. Once I learned to accept and accommodate information against my preferred view, I became a better trader.

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