That was one hell of a question!!:thumb:
It has taken me some thought to come up with this response and I am not sure if it would serve the purpose:
Stock market trading is done at the present using data from the past. A classic modus operandi of reading past behavior to predict future prices... this leads us to what I call the 'Prophecy Effect' - living the prediction!
It is easy for traders to ascertain future price points based on past information... but very difficult to maintain their poise when they see present data along with the past. Why? - because they continuously predict or live their prediction.. and their mind continues to provide more possible price scenarios in the present...
If this has gone over your head... let me try to explain with a simple example:
Assume you are reading a 5 min chart... you see a classic evening star formation that is signaling further downside... you plan to enter the position at the beginning of the next candle and place the stop at the top of the eve star pattern... you also have a price target at 2% below entry. This is your Prophecy!
The next minute, you then see the candle forming a green/up pattern... your mind now can come up with various price scenarios... evening star has failed.. look at the 3 min for confirmation... wait for the next 1 min candle to be bearish etc etc... all this is 'Prophecy Effect' or living the prediction. where you have conflict with an absolutely clear idea of the past to some vague contradictions in present... at the end you either take your planned trade or don't trade or worse.. .exit an otherwise good trade.
How do you get over this problem?
The answer is simple... stick to your past analysis and let the trade play out.
In my earlier post what I meant was - analyze based on weekly patterns, trade on the daily time frame... so you basically look at weekly chart on Sunday and plan your trades for your next week.. on Monday the daily charts will help you get the best entry in terms of risk:reward... at any cost you SHOULD NOT LOOK AT THE WEEKLY CHART DURING THE WEEK, as this will only distort your earlier analysis.
Hope this long post helps!
It has taken me some thought to come up with this response and I am not sure if it would serve the purpose:
Stock market trading is done at the present using data from the past. A classic modus operandi of reading past behavior to predict future prices... this leads us to what I call the 'Prophecy Effect' - living the prediction!
It is easy for traders to ascertain future price points based on past information... but very difficult to maintain their poise when they see present data along with the past. Why? - because they continuously predict or live their prediction.. and their mind continues to provide more possible price scenarios in the present...
If this has gone over your head... let me try to explain with a simple example:
Assume you are reading a 5 min chart... you see a classic evening star formation that is signaling further downside... you plan to enter the position at the beginning of the next candle and place the stop at the top of the eve star pattern... you also have a price target at 2% below entry. This is your Prophecy!
The next minute, you then see the candle forming a green/up pattern... your mind now can come up with various price scenarios... evening star has failed.. look at the 3 min for confirmation... wait for the next 1 min candle to be bearish etc etc... all this is 'Prophecy Effect' or living the prediction. where you have conflict with an absolutely clear idea of the past to some vague contradictions in present... at the end you either take your planned trade or don't trade or worse.. .exit an otherwise good trade.
How do you get over this problem?
The answer is simple... stick to your past analysis and let the trade play out.
In my earlier post what I meant was - analyze based on weekly patterns, trade on the daily time frame... so you basically look at weekly chart on Sunday and plan your trades for your next week.. on Monday the daily charts will help you get the best entry in terms of risk:reward... at any cost you SHOULD NOT LOOK AT THE WEEKLY CHART DURING THE WEEK, as this will only distort your earlier analysis.
Hope this long post helps!
