A recent comment from a reader got me thinking about HFT, expectations and trading technique. I said all those together because I think if you are believing HFT, market makers or the bulls/bears are responsible for your losses then you really need to wake up and deal with the fact that only you are responsible for your losses. Blaming someone or something means that you don’t understand risk and probabilities well enough. If your edge is suddenly not working first confirm that your expectations and trading technique are still being adhered to in the way brought you success in the past. Has anything changed on your part? Are you sure? Is your ego making the decisions?
The market, like always is currently at a point where many things could happen. What are your expectations? A big drop/a rise/flatline? Are you staying in trades too long? Are you adding more size and getting beat up? Are you having many trades getting stopped out?
There is a time and place when probabilities are greater of one event happening over another. Are you gathering the information available and getting on the correct side of the trade? If you are not of the correct side of the trade, do you recognize it and act appropriately? Remember there are always two sides to every trade and your job as a successful trader is to be on the winning side. Are you being inflexible due your expectations?
Are your expectations of direction and profit targets colouring your judgement? I don’t go into a trade thinking how much money I’m going to make due to thinking that I know where a stock will go to. I don’t know what direction a stock will move. However I do know when my edge is present and that probabilities exist and manifest themselves all trading day long. That’s what I go into a trade thinking about, after I account for the possible downside and set my stop.
Have the HFT programs taken the psychological stop setting pain thresholds of traders into consideration? Well the market makers have always known the likely places for stops to be set so this is not a new idea. Has all the recent talk about HFT put the idea of a big bogeyman on the other side of your trade? Has it affected you thinking about what you may be up against?
Are the HFT in every trade, every stock? What about the stocks that are not doing millions of shares a day? Can you adjust your style so that you can grab the excellent trends you still see every day?
Or can you forget that you ever heard of HFT in the first place and focus on and I really mean focus on your trading instead of wondering/worrying about things you can’t control. The market can’t be predicted or controlled so this is best way to think about it anyway. What you can control is your trading technique. Your plan. Your execution. Your focus and concentration. Your edge. Your profit taking. Your fear. Your greed.
Call me naïve all you like but I know that the less I think about what the markets will do and the more I apply my technique, the more success comes my way. That’s because I can see, acknowledge and act on it, That means trading my edge , taking losses as they happen, taking profits as they are offered and changing directions on a dime. One mind-trade my plan.
Market conditions and factors will make it easy to make money soon enough like they always have in the past. Support or resistance levels will be broken, news events will affect the markets. Trying to force something or getting mentally beat up and vowing to work harder through analysis won’t get you farther ahead…until the markets themselves are ready to go.
In the meantime have patience and take what the markets are giving at the moment. It’s the attitude and what you should always be thinking anyway.
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