Right mindset

Thinking from the markets perspective means forming connected ideas about what and when to buy and sell from the view of the facts and events in the market.

The facts and events are movements of price in tradable instruments. If your perspective causes either positive or negative emotional feelings in you about the price movements, then you are NOT thinking from the market’s perspective. You are thinking from your personal perspective by attaching meaning and emotion to the price movement. The meaning is the effect that the price movement will have on your financial position and hence your life. You are being selfish not empathetic. You are not being neutral, you are taking sides.

The market has no idea what effect it will have on your personal financial position and is therefore neutral. It is natural to think from your perspective and connect your ideas and thoughts to the view you have of the price movements, charging those movements with negative or positive emotions, depending on their meaning to you. It’s not about you, it’s about the market.

To think from the market’s perspective is to see the price movements from a completely neutral viewpoint–that is, as necessary and acceptable movements of a market–and not personalise them to your situation. You feel from the market’s perspective. This is market empathy. This empathy will develop over time and over a large sample of trades as you learn to trust the system. Whilst it may be difficult to grasp this over a small data sample, and in particular, a period when losing trades are being experienced, a large data sample and number of trades will assist greatly in developing empathy.

If you take a position in the market at a certain price and the market moves down in that position, you must accept that the market is simply moving as it always has and always will—up and down.

This requires total surrender to price action and pre-acceptance of the outcomes of your trades that result from the price action. To gain control you have to surrender control. Hey, yet another paradox!

Surrender is required because there is no way of knowing the outcome, unless:
(a) You know what the price action will do in the future, or
(b) You can somehow influence the price action to your advantage.

And the answers to those two points are:
(a) There is no way of knowing what the future holds in the market, even the next few seconds. There are       simply too many variables that act on price action for any single human being to comprehend and monitor
(b) That’s illegal.

If this price action results in a loss trade, then that is what is. End of story. We will examine this fact in more detail next week.