I have decades of journals that show me 95% of these trades would have lost by anticipating. Reaction is just being a robot as you have rules to do whatever the next step is to do.
You know I am not good at chart reading. Anyway, whether you anticipate or react, it takes a lot of practice and actually understanding of what causes the changes in price. Is it random due to random people buying and selling or some big fish buying/selling? How do you learn? Anticipation works if you are an insider or have superior analytical skills to pick out trends way before they are trends (FA?). Reaction? Perhaps the word is follow rather than react (PA?). Back to practice reading charts. Regards,
Anticipation and reaction are both very useful. Both are operational bar-by-bar and assert their dominance depending on context. Anticipation is distinct from predicting. Predicting is a static state that values the map more than the territory. Reaction is a malleable state that is counter-intuitive depending on experience. The less experience, the more counte-intuitive. The reaction state values the territory more than the map. Anticipation, when distinct from predicting, creates simultaneous possible future into now scenarios. This state values a balance between the map and the territory. In essence, it’s a dynamic state that is in a constant feedback loop of refinement. As the future comes into now, what’s happening now (territory) informs developing scenarios (refining the map). Predicting weights one scenario at the expense of present time signals of other developing scenarios. Automation, mechanically creates a field of anticipated scenarios and the reaction to those scenarios. The quality of anticipation is influenced by the map one has of the territory. All internal maps can be refined through time as external conditions change provided that there is a mechanism of feedback. Failing to refine one’s map on market structure and operation leads to ‘less than.’ Continually updating and refining one’s map on market structure and operation leads to ‘more than.’ Korzybski’s ‘Science and Sanity’ popularized the concept “the map is not the territory.”
Observation, hypothesizing, record-keeping. Eventually one becomes sensitive to the meanings of all those movements.
Have you read John Magee's General Semantics of Wall Street? I suspect you'd enjoy it, particularly the discussion of maps and territories as applied to the markets.
A trader has one job... to be on the money-making side of the market. An expanded job explanation is... to be, and to remain, on the money-making side of the market. The definition of remain is determined by the style of trade. A position trader will endure larger give-backs and/or drawdowns vs a swing trader, vs an intraday trader, vs a bar-by-bar trader, vs a tick-by-tick trader, etc. At any moment in time there is only one question... does the real-time activity/movement/environment indicate continuation or change? If it is change, "remain" is in play. If you do not have techniques to recognize continuation and/or change, you can not anticipate anything! In that case, all you can do is guess and react. Otherwise, you anticipate, and as @Handle123 stated, you react to the rules like a robot. You're driving on a 45mph street. Ahead is a stoplight that has been green for about 10 seconds. You are about 1000 feet away. Do you anticipate, react, neither, both, or ask google what is a stoplight, what does green mean, and what comes after green?
Thanks for the recommendation, I didn’t realize he wrote a second book. Looking forward to reading it.