Before I had studied Zen for thirty years, I saw mountains as mountains, and
waters as waters. When I arrived at a more intimate knowledge, I came to the point where I saw that mountains are not mountains, and waters are not waters. But now that I have got its very substance I am at rest. For it’s just that I see mountains once again as mountains, and waters once again as waters. – Ching‐yuan
FX Trading – Getting back to the trend instead of intellectualizing…
We didn’t publish CC yesterday, as it was a day of trying to get the head right.
To do that, I usually re‐read some of my favorite books about trading.
One I particularly like is Zen in the Markets, by Edward Toppel. I have talked
about this book before in these pages. The author cuts right to the chase in this book. He clearly shows the battle for trading success isn’t with the market; it is a battle against our ego.
The basic premise of the book is “you never know what the market will do,” and the best you can do is follow Mr. Market. Therefore, if that is the best you can do, then you should only believe what you see, not what you think. It’s the thinking part which gets us into trouble.
Mr. Toppel provides a few major examples of thinking vs. what was seen and how many players’ lost money or left a bunch on the table by not staying in the moment of the trend, including: The powerful US bull market rally following what was believed to be the world-ending 1987 stock market crash. The Mexican peso default in the summer of 1982 led many to believe the budding bull market would be derailed and hurt the US economy. It didn’t and the market continued to soar. My favorite example was the popping of bubble in Japan in the early 90’s; strategists thought it would roil market everywhere—again it was barely noticed.
Could we see China’s stock market crumble and it have no impact on other world markets? Why yes, even though we have thought it would be the touchstone indicator that triggers risk aversion across all asset classes.
….read more HERE.
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