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“Markets are never wrong – opinions often are”

“Markets are never wrong – opinions often are”

From Craig Cobb at Trade with Precision:

This quote was penned by one of the legends of the markets; the king of old-school himself - Jesse Livermore. The best part about this quote is that it is still as true today as it was when he first said it back in the 1920’s. So why does it matter to us right now?

“My neighbour works for Goldman Sachs and he said XXX is a good buy”. Is that a ‘good buy’ or ‘goodbye’ to our money? I must admit I have done it myself and I am sure many readers have too; taken tips from people because we want to believe them and their ‘trusted’ opinion. The fact of the matter is that if you are taking advice from your cousin’s husband’s best friend’s mate then chances are that you are not making consistent money in the markets.

So what is the point I am trying to make you ask? Leave your opinions at the door when you trade the markets as often those who do not have their opinions proven very wrong, and painfully so. There is no room for an ego in the markets. I have often heard people say to me “yes I am new to trading but I will just give it a go before I commit to learning how to trade.” These same people are those who have spent years studying or training for their current career or job and yet they think they will pick trading up easily because “they have an idea”- they almost never do.

So how do we come full circle and avoid the errors most often made by those misinformed newbies?

It is all in the quote “Markets are never wrong – opinions often are.” We need to learn to trade the markets and not our opinions – and certainly not opinions of others. Trading is a business of probabilities – you need to have a strategy and trade it flawlessly each and every time. By doing so you remove the emotion from your trading decisions which in turn eliminates the need to have an opinion on the market. When you get things wrong and lose money it doesn’t necessarily mean you’re trading badly it may just be a losing trade. Provided you have your trading plan in place and you manage your risk, a losing trade can be a gift as long as you can learn something from it. Don’t be scared to admit you were wrong and ask for help. Imagine if we didn’t do this in our everyday life, ask for help that is. We do it all the time, doctors, accountants, lawyers, bus drivers, parents, family and even the same neighbours that have the hot tips! If you ask for help in the right places once again you ultimately stand a better chance of learning and improving your trading.

The process of admitting you were wrong opens up a gateway to furthering yourself as a trader and it can bring new people into your trading circle who can help guide and further develop you. However if you don’t admit you were wrong and start playing the blame game then you could begin chasing your tale and increasingly feel the urge to rely on the opinions of others.

So next time you want to buy into someone’s hot tip or throw blame in a direction other than at yourself remember one of the lessons from one of the greats “Markets are never wrong – opinions often are.”

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