We are all essentially economic forecasters. And we all have “our” forecasters. Some of us might regularly take Adam’s gold commentary and suggestions straight to the bank. A few of you might feel like I owe you money (the check is in the mail, just hold your breath). The more time we spend around commentators we find sharp, the more our views drift in their direction. And why not try to emulate the people we respect? But even more than forecasting cred, it’s ideology that guides our trading.
This isn’t new information – it’s barely interesting. It is, however, crucial. When a political/economic move you find ridiculous takes hold and the market acts differently than you feel it should how do you step outside yourself to play the trend? Or do you lie in wait, biding your time to short the imbecilic move and be heralded as a hero by all likeminded traders?
When do you surrender? I rode the NZD/JPY up, up, up from late last year and well into 2014. At some point the party will end. How much money will I lose before I realize I’ve been jilted, left standing alone in a room with a stupid party hat on and a massive bill to pay?
That was messy. Let’s recap:
1. When do you trade against a move you feel is based on a huge misunderstanding?
2. When you agree with the loudest and most prevalent market sentiment but the trade isn’t going your way, what does it take for you to reverse direction?
3. When a trade has gone right for so long what does it take for you to recognize the party is over?
