Earlier this week I reinstated my longs on the Dow – the combination of a breakout to new highs and a low volatility is hard for me to resist and as fate would have it the market decided it would reverse.
So what does this mean for this position? At present nothing, markets do this all the time and it is something that catches out new players. They receive a signal that appears to tick all the boxes and price instantly reverses. The initial line of thinking that follows this sort of event is that their method is invalid and needs to be altered. However, this line of thinking is based upon the notion that every signal is supposed to be correct and that the market operates in a very clockwork way. Markets are unfortunately very dirty little things and price does not run to mine or anyone else’s time table. Instead of tossing your toys from the pram the correct course of action is to simply persevere. I will continue to hold these longs until they hit my stop and I am conclusively proved to be incorrect. Once that happens I will move onto the next trade and repeat the process. I have found that it is this process of repetition that makes life easier – the more you do something that is uncomfortable the easier it begins. I also realise that my success does not hang on the outcome of a single trade but rather on my application to a never ending succession of trades.