What is more important in trading?
What is more important in trading?
reaction...........'cause price is the master of the markets.
Being small and nimble allows one to react to price action. But to anticipate moves I think is the "holy grail".
I guess a combination of the two is most appropriate. Anticipate but be ready to change your mind and react quickly.
It all comes down to trading the plan and planning the trade - in advance. Trying to react to price movement without either will result in over trading and mounting losses.
You don't need Reaction if you have the supernatural ability to 100% predict Anticipation.
Either Or questions in trading is rather close-minded, you should always think dynamically, variably...Grey, always somewhere percolating in the middle.
Placing a trade on Anticipation will cost you big time over the long run because the market often does what is least expected.
Placing trades on Reaction means you are trading on confirmation, the secret is to move very fast in order to get max purchasing power. If the trade fails immediately (not that common) you can bail out nigh on unscathed.
Reaction has higher probability than anticipation imo.
A trade failing on anticipation has more downside in terms of price negativity than a trade failing on reaction imo.
One person on ET told me that anticipation/prediction is for losers, reaction is also for losers. You need to do something obvious.
It needn't be one or the other. Anticipate those levels or zones or points at which you expect traders to behave a certain way -- such as yesterday's high -- and then react appropriately if and when that behavior exhibits itself. If they instead give it a yawn, then stand down.
I dont see how reacting can be for losers. It is something that must be done if trading a discretionary method. I think the question is if there is room for anticipatating (predicting) a certain outcomes based on what you see in the price action. I am refering to price action indicative of accumulation / distribution. Can you even make such a judgement without seeing the confirmation (breakout) first and then reacting?
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.
Maybe you've spent decades anticipating the wrong price at the wrong time.
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.
Handle has good reaction, so no need to anticipate.
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.
Anticipate but quickly change your mind if reaction is not favorable
Let's give example.
Price is going up. then price retrace to a particular level.
You anticipate price will continue to go north from that level.
then you buy immediately.
very difficult to earn money this way.
now talk about react.
Price is going up. then retrace. then price proceed to go north and it gives you a signal.
You react to that signal immediately by buying.
I like your sequence, but you did anticipate by preparing for the possible turn which you then reacted to.
Yes but OP was aluding to placing a trade at the anticipate stage, whereas some of us are saying this is less profitable than waiting and then placing a trade on reaction of price.
I got that, I took it a little deeper.
Would you consider buying a reaction near support looking for a break out up north past resistance an anticipation trade or a reaction trade? Or is it both?
An anticipation trade is placing a trade expecting price will go toward your buy signal.
A reaction trade is placing a trade upon or shortly after your buy signal has been activated.
Price running through resistance and then placing a trade would normally be considered a reaction trade.
I did wise up to place them in a journal to save money and better discipline to only do system trades. Some trade from the hip very well, but we all know this style has to based on good memory of some type of rules. For me it far better for the system to either be right or wrong to be able to sleep nites.
You need to be good at each when you need to use each. Like when you need a spanner you need to know how to use a spanner, when you need a screw-driver, you need to know how to use a screw-driver. Neither is more nor less important than the other, its the skill deployed in selecting which to use and how to use it which is most important.
Why would you do that?