Never Trust Your Gut

Yesterday I once again got reminded of a crucial lesson that I learned years ago as a fledgling trader and which bodes repeating. If you read that post then you recall that I was all hot and bothered about bonds – equities in comparison merely seemed to be the sideshow. Well, a few hours later reality kicked in and bonds all went upside down with equities steadily dropping toward our stops.

However earlier this morning our patience got hugely rewarded. Truth be told a few ticks lower and my stop would have gotten snagged. Better to be lucky than good as the saying goes. It’s now looking very positive however and we could be at the onset of a short squeeze.

I also got spared the grim stop reaper on the NQ. My stop is now at break/even – I’d prefer it a bit higher but as I am expecting a bit of a retest before this thing picks up steam it’s best to be conservative and not trail too aggressively.

Soybeans have not gone anywhere but things are very much coiling up here. Still in the running and nothing has changed since yesterday.

Soybean Oil – same story but it’s looking a bit weaker. My stop is still intact but this may be a goner.

GBP/CHF – I told my subs that nobody in their right mind would be long this thing after that strong push higher and fortunately I am not limited by rational thinking. My stop has now been advanced to below a recent stack of NLSLs. The turtles most definitely would be smiling at this one. Not sure what it is about trend trades but somehow they are manna for a trader’s soul.

CHF/JPY – per the plan I flipped after being stopped out of my long campaign. Thus far it’s been treating me well and I expect to hold this one as there’s nothing but air below.

Lesson of the day: Your gut feeling means absodiddly nothing – it doesn’t matter who you are or how long you have been at this game. Whereas in real life instinctive decisions in many cases turn out to be correct in the long run, in the trading arena the human mind is tragically ill equipped to guess its way to financial prosperity.

In the end setups are nothing but trading ideas near technical inflection points. So get over your precious ego and instead rely on your system rules. Trust your edge if you have one – it knows far better than you.

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Cheers,