Sometimes as a trader, it is easy to get hijacked by your own trading opinions or those of others. First, we have to understand and separate what is a trading opinion versus fact.
Hijacked by Your Own Trading Opinions
According to Webster’s an opinion is:
A fact is:
Something that actually exists; reality; truth.
Our indicators are factual and based on mathematical calculations. We can see them, interpret them, and analyze them. Opinions are beliefs and everyone has a different belief. Trading opinions are like throwing darts at the screen and hoping for the best or at least that more traders have your same belief than not.
While it is easy to say check your opinion at the door, it’s much harder to implement. For example, last week when Yellen spoke, she came out and almost guaranteed a rate increase in December (with the caveat that the upcoming reports needed to validate what they were seeing). Then after the Non-Farm Employment numbers came out, the numbers pretty much sealed the deal.
While there is a consensus that this would cause markets to fall, the markets actually went up on the news all week. Trading your opinions would cause you to lose money, and I should know because I was trading mine. Everyone, including me, is anticipating the markets to fall. They are extremely overbought (indices) and Gold is extremely oversold. Of course, no one wants to miss out on this huge movement so we enter early — based not on our indicators or methodology but on a “hunch” and “opinion”.
It took until Monday of this week for reality to set in among other traders. Reality that the Non-Farm Employment are somewhat seasonal. The numbers for October were higher than anticipated but that is also typical as retailers begin to hire additional employees for the upcoming holiday season. With the holiday season approaching, consumer spending should also be up — this is typical.
Any surprise that the FEDS wanted to wait until they could anticipate inflated numbers before raising interest rates? Or is it a surprise that the rate increase will be on December 16th? Right before the holiday when most traders are preparing for their holiday vacation?
In the end, does it matter? No. As traders, we should be trading what we see on our charts and not our trading opinions. Should we keep up-to-date on events? Yes, so that we are not surprised. However, while we can acknowledge what is happening around us, we then must look at our charts with an non-bias view — and that is the hard part. Easy to say, hard to do.