Friday, February 1, 2013

Resnn dips its' toes back in the water ...

Today we had a nice up move in price (volume on the day was lighter though) and we closed at new multi-year highs for the Dow and S&P-500

I wrote a post over a year ago that was helpful to reread today.  It is called, "contradictions".  It is a good read that details my trading style and philosophy and how I deal with being wrong.

Time will tell, but today it appears that I was wrong, that the weakness I saw over the past two weeks was indeed not weakness.   As a result, we have moved 30% back into the market.  We are still taking a cautious entry because I am not sold on this new up move quite yet.  For a 1% up move, the volume and previous price struggles is causing the model to lean toward the defensive side.

I have a saying that I stand firmly by ... "It is okay to be wrong, but it is not okay to stay wrong".  Fighting the trend is a loser's bet, and with price continuing upward, I simply move back on the train and see how much further it wants to go.

With all the above said, it is important to note that I choose to be wrong by missing out on profit, instead of being wrong and losing money.  Taking a cautious approach when the market is showing weakness will create some incorrect moves like we experienced today, but over the long term it will keep you in the green more times than not.

Being wrong at times is just a reality in the market, the sooner you accept that, the more successful a trader you will be.   I spent a great deal of time in the beginning of my career trying to find a 'Holy Grail' that would predict the market perfectly every time and eventually concluded that a perfect 'indicator' simply doesn't exist.  It is just probabilities ... simple statistics ... if you know your probabilities you can limit your losses and maximize your gains.  

Check out the "contradictions" post, it is a good read for days like this.

Have a great evening!

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