I wrote about Mark Douglas and his 5 Fundamental Truths of trading here. In this post I give an example of how anything can happen (one of his fundamental truths). Interested? Please read on.
Anything Can Happen? A Short Explanation:
The market can’t be predicted. If it could, there would be strategies with 100% win – rate. Even if you have a strategy with 99% win – rate, it still means that there is a change of a trade not working out – maybe not the next couple of trades, but given enough trades, the loss / losses will come.
There are too many forces at play in the market, some can and will happen unpredictably. These forces can change market dynamics on a dime. You can have a perfect trading setup with all the boxes checked, and it can still end up being a loser (with or without a reason).
The Example:
Oil prices went negative in 2020 due to certain unpredictable dynamics caused by the COVID pandemic.
In 2022 oil went over $100.
Anything can happen in the markets.
Imagine buying oil on the way down believing it can’t go any lower. Then trying to short oil on the way up believing it must come back down.
I believe a lot of people got hurt in the oil markets during that time because believing something is going to do this or that is not a strategy. Believing something must happen a certain way in the markets are futile, it will hurt you in the long run.
Finally:
Whatever your views in the market, analyze it according to your strategy. No matter how high your conviction is on a trade, place the trade and manage it according to your strategy / rules. Always remind yourself: anything can happen.
Thanks so much for reading. All the best with your trading.
Thanks and Regards,
Trading SOS SOS
