This is confusing I agree. There is a subtle distinction though. What people usually mean that prediction is not a good thing to do is when you are predicting a turnaround - so for example, tops and bottoms against vicious momentum without confirmation. In other words, the cases where you are acting like a hero. However, in some sense, when you enter a trade, you are making a prediction that it will continue or reverse, based on some confirmation and logic. Also, most rules are meant for beginners - an expert knows when to break them and more importantly, how. nitro
you bet on sure things.... cool so your win rate must be 100%.. congrats!! It is a 100% in real estate! and I always make 20% or more in less then 6 months! I have been doing it for over ten years. Hopefully in another year or so, those bonds sell off, the fed raises reserve requirements for banks, and most real estate markets slown down. I will be back to trading! Just waiting for the right time! Looking for the sure think
Tops and bottoms are not predicting! Looking at the volume and order flow or the trading floor. You will find the true bottom or top. The facts that would show that is a strong bid that eats all those sell orders. Cupliation, big prints, and knowing it's only a panic. Big difference between panics and a fundamental sell off. When you trade a stock often you need to call investors relations everyday. Only works on small company. If they keep telling you things are fine, buy the dips that stop dead on heavy volume. What I am trying to say is find a strong fundamental trend. Look for the market makers or specialists to counter trend the market. It's not a sure bet but at least you can tell someone has the info needed. Market makers have there order tickets to do that for them. I was trying to make a point to these new traders that they are looking for the holy grail in many forms. They think predicting is OK using whatever tools. It's hard work and takes many years to know what you are doing. Making a living trading or any other business is not predicting. Either you know what you are doing or don't. There are a few lucky one but it all catches up in time. No Shortcuts!
Maybe so, but that is a rather double-edged sword. Some of the biggest and most famous blow-ups resulted from so-called experts "knowingly" breaking their own rules in the heat of the moment. Similarly, I think I read somewhere that there are proportionately more fatalities among experienced handgliders than there are among rank beginners. Is it a case of more air time or overconfidence? Either way, I imagine that, on balance, most people live to regret the breaking of their carefully thought out and tested rules. Just my opinion. In your own case when you are breaking your own rules, how do you know that you are not just succumbing to overconfidence?
I think that any person who uses the term "sure thing" in connection with trading the financial markets is setting himself up for pain and suffering. P.S. The fictional Gordon Gekko traded illegally on inside information. That was his "sure thing." Fortunately, the writer of that movie saw fit for him to be caught by the authorities.
Maybe so, but I still think that there is a distinction between those who trade on the basis of preceived tendencies and those who "confidently" predict future price levels and the timing in which their chosen markets will reach those levels. The former are pragmatic traders. I view the latter somewhat less favorably. Perhaps incorrectly, I am more inclined to call this latter group the "predictors," and not in a good way. Just a personal bias in my effort to draw a distinction.
I agree with you and I wish I could explain to you the feeling and instinct one gets when you know that it is time to break the rules. As long as your risk parameters are intact and you don't violate _that_ rule, it can be the correct thing to do. You probably read that "overconfidence" story in a book I recommended on this site, called "Deep Survival". nitro
Actually, I never read that book or even heard of it. However, a number of years ago, I had a misguided case of overconfidence and lost a substantial portion of my trading account in a fairly short period of time. Equally important, I developed a severe case of risk aversion, which took me a long time to get under fairly reasonable control. Presently, my trading is considerably improved although I have yet to experience the type of confidence that I had just before my account decimating campaign. I prefer it this way. Although I was nowhere near an "expert" either then or now, I am left with the lingering feeling that overconfidence is a devil to avoid. Hopefully, I will remain this way as I get better. However, I will agree that your point about not ever violating the risk management rule resonates and puts your earlier assertion into proper perspective.