TheRiskBlog

We all know what it is like when you see a chart and instantly know where the price is heading. Since you “know” that price is going up you go long. Now this was a controlled, rational decision you made, you saw the chart, you knew what was happening and you reacted, or was it?Actually you didn´t decide at all, the market did it for you, or better yet, the chart did. It made you see something that you wanted to see. It suggested control where no control is.

When you see a chart and you “know” where price is heading always stop. Lean back and think about the situation. There is no way to know where price is heading, even if you know the news. There could be some investor out there who bought long ago, made tons of money and wants to sell now, so how can you know that it will be a long move in the days to come. You just don´t. The only way to know is to be on the board of the company in question, but even then you do not know what everybody else is doing with your stock.

So don´t get into the habit of following your gut feeling, always make sure, that your decision is based on controllable parameters.

What are these?

Well, you can control how much money you want to lose and you can control how much money you want to win. You have the knowledge about what your account is showing and you could stay out of the market today and participate tomorrow. So, once again move on controllable parameters and you come up with a decision, move on the signs the market shows you and the market made the decision.

And you guessed it, when the market decides for you, you will lose in the long run, so always make sure you are the decisionmaker.