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fectly aligned only after they are no longer aligned, so now you are forced to enter the trade after the fact! I have found that if I use any metaphor that suggests I can somehow predict the price movement then I am creating stress and anxiety. Here is my extended metaphor for the market: |
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The market is like the game of GO. Whereas the game of GO is played on a horizontal board of 19 vertical and horizontal lines, the market game is played in the space between my ears, on a vertical board of price and time. As in GO, where I play from the strength of my stones and intellect, I play the market from the strength of my beliefs and virtues, and the annihilation of my vices. I place my GO stone at a place on the board where it will create the best tactical advantage. I place my order to enter at a price and time that I have identified as a critical price for me to profit. |
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My metaphor is what allows me to trade effectively. Underlying my metaphor is a score of beliefs, references, and values. It allows me to enter and exit a trade with certainty and conviction. It took me a long time to create my metaphor, I did not set out to create it; it was created from the thousands of hours of research. Don't worry if you don't understand it. You must be a GO player to begin to fully understand the ramifications. |
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Pick up any book on technical analysis and look up "exit" and "stop" in the index. What you may discover is that there is a section on stops and none on exits, or a short paragraph devoted to exit strategy and a page devoted to stops. Why is this? Can we assume that because exit strategies are barely discussed they aren't important? Do you know the differences between getting stopped out and making a decision to exit? |
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All too often, traders devote all their energies to devising a methodology on how and when to get into a market. Then after hundreds if not thousands of research hours, they sit back and think they are finally done because they can positively identify a bull market, sideways to up, sideways to down, and a bear market. After a little reflection they figure that they had better develop some sort of exit strategy. Consequently they will spend a small amount of time on an exit strategy and then consider their work done. |
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Your exit strategy is critical to your financial survival. Your exit strategy will invariably be related to your entry strategy and your risk tolerance. For all too many traders the exit strategy is nonexistent, and is in fact the |
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