In a fairly recent Coaching Insight on our Facebook page, I talked very briefly about the fact that a successful trader will spend their entire career, full or part time, dealing with uncertainty. It’s never going to go away it’s just what perceived level of uncertainty, happens to be going on at that time.
Conceptually that’s how a successful trader makes their money. Being able to trade the ever-uncertain market, that despite leaving patterns over time, is never exactly the same as each new second goes past. A successful trader will have to come to terms with this regardless of how good their strategy seems or how good it’s performing at that time.
Successful traders know the good times will often be followed by periods of less good times and acceptance if this is a vital part of your trading growth.
Think of it like this; as a successful trader you are paid to deal with uncertainty.
Study Tony Robbins’s six human needs and you see that nearly all humans will initially look for certainty (in many different ways) and try to avoid uncertainty. So what we do at Traders Support Club is enable a trader to create as much certainty as they possibly can through their technical analysis, their back testing, their trade management and most importantly through developing their trading mindset. So regardless of how much fear and uncertainty is manufactured by the media, or over hyped by the media, the trader can maintain their strategy and trading process. During times when there is a period of mass uncertainty or mass change, as we have seen more than once in 2016, the media are first ones to stir up the masses trying to great hysteria. Traders know for every action there is a reaction, in some form and to some degree, regardless of Trump, Brexit, Italian banks on the brink, and other various precipice’s, correctly or incorrectly we are currently sat on.
I see varied advice on social media from saying things like, look at your charts and if you see anything unusual then stay away from the market, and to that’s OK advise on one level. However, what do you define as unusual and what it doesn’t take into account is the trader’s individual circumstances or trading style. Other suggestions included taking a couple of weeks off around the US elections, which again is not bad advice but doesn’t factor in the traders personal trading strategy and time-frame over which they trade.
Then you have the other extreme where adverts are put up and emails sent out from brokers encouraging you to trade the US elections and to take advantage of the unique opportunity, right when they increase their spreads and margin requirements Which in my personal opinion, unlike the other previous suggestions, is madness and essentially a form of gambling.
On top of that I saw another person’s suggestion to buy physical gold and silver (not trade it) and sell it the other side of the election result because if Trump got in, it was likely the market would react badly and the Gold price would as such, would go up. Well guess what? They only got some of the prediction right because Trump did get but the markets didn’t react badly and the gold spot priced dropped.
Anyone who knows about the physical gold market knows that even had the main markets pushed down as a result of Trump getting in, and in response the spot price of Gold had gone up in value, dealers premiums (or in other words the dealer’s spread) would have meant you would have paid more than spot price the day before election to purchase the gold and despite an increase in the spot price in the coming days, you would then have had to sell your Gold it at less than new increased spot price back to the dealer. And with the likely premiums involved, and some dealers increasing these (increasing the difference between the spot price and what you pay them and what they pay you) around this time, it would have meant that nearly all, and possibly more than all of your profits on the spot price increase would have been taken up in premiums paid to the bullion dealer, resulting in you possibly even making a loss. Again this would amount to another form of gambling and is a ridiculous piece of advice.
I have a very specific physical gold and silver purchasing strategy over the longer term and the opposite of my short term trading strategies both in terms of time scales and criteria. A successful trader may well have seen an opportunity to short Gold in the coming days after the election, subject to his or her strategy criteria being met. If that same successful trader has a specific long term Gold and Silver bullion purchase strategy, they could have taken the cash profits made from the short sale of Gold and then used those profits to purchase more physical gold and silver at the new lower price! All the while not worrying about the dealer premium because they were only purchasing once in the short term, they were paying less for the physical Gold, and were using profits made from the Gold price moving down. All the while the strategy would be to either buy Gold as a hedge against their cash reserves in another economic down turn, or as long term investment. That to me would have been a much more measured, strategic and smart thing to do ;-).
Myself and the Traders Support Club team and Traders Support Club members are skilled traders, whose primary focus is on day and swing trading, and follow very specific rules and use our discretion as we see fit and relative to the trade and the strategy we are focusing on. As well as some long term Gold and Silver investments!
To be clear I may not trade on the day, or the day after big news announcements, partly due to the broker, just like bullion dealers, increasing their spreads and margins. However, my time frame for sitting out of the market is a personal one and one that even if I get wrong, from a trading results perspective, I would only know that after the event. That’s why I would make sure, as I do on every trade, that my risk management is on point because very stringent risk management processes will always be the number priority
So don’t break your rules, don’t chase trades you normally wouldn’t take, but if your risk management is good maybe avoid trading on the actual days of potential huge global announcements but be wary of sitting on the sidelines for too long and accept that losing trades are going to happen regardless, so managing trades correctly is what’s most important.
Over the coming months in 2017 and beyond, there is likely to be more uncertain times, made to be even more uncertain by the media. So as a trader, I will keep prioritizing my defense (risk management) I will stay focused, keep doing what I always do and proceeding with the same set of strategies, caution and common sense.