The setup has to trigger to get into the trade. If it did not trigger and the price action did not show you that the stock price was moving higher, why would you trade it? So, that is more reactive trading as opposed to predictive trading. Some traders will try to predict for instance based on poor earnings and sell a stock, figuring it will go down. What happens when the stock instead, goes higher? So price action, candlesticks, setups that trigger, all tell you to get into that stock. I "did not" predict the stock would go higher. A confluence of factors was telling me that the stock is going up. That is the reason to go long. My opinion of the stock does not matter, if the factors tell me otherwise. That is what gets me into a trade, not because I thought a stock would go up or down. What I think about a stock does not matter. However, how the stock price moves and in what direction is what matters. It has to move before I take action.
What would you say belongs in a solid trading plan? https://elitetrader.com/et/threads/...solid-trading-plan.340340/page-4#post-5031706 >
Unless you're using a 100% automated system I still think you're responsible for deciding whether to go long or short. YOU are the one interpreting the triggers and signals in a non-automated situation,you're the one clicking the mouse.
This is why I inform myself as to what is going on in terms of fundamental analysis, but I trade in accordance with technical analysis. If traders think a stock has value, they will SHOW me this through price action. I don't need to be reading about earnings, interest rates, inflation or unemployment. Fundamental analysis MIGHT (or might NOT) tell me WHY an asset is going up or down. But, I don't really need to know why to take advantage of the fact that this IS what it is doing. I trust what I see, and NOT the speculation of so-called "experts" or even that of my own.
Well, someone has to put the order in. My trading system is as close to automated as I can make it. I have no clue on how to code and make it totally, automated. However, even automated systems are based on trading rules devised by the trader. My point being about reactive trading vs discretionary trading. I react to what the price action is doing as opposed to what I think it should be doing. In most cases, when I use my own discretion to trade, the market moves in the opposite direction.
We tend to be our own worst enemy when we try and outsmart the market. It never turns out well for us.
All trading is 100% predictive in nature, even fully automated algorithms. Entering a trade or exiting a trade makes a prediction of what's to come. Even trend following strategies are predicated on the prediction that the trend continues.