Beware the Slot Machine Syndrome

Profitable traders know that prediction is best left to fortune tellers. They realize that markets can move in unpredictable ways. Trends in place remain in place all the way until...they break down. And there is no telling exactly when that will happen. That's why good traders make decisions by using hypothetical scenarios.

The idea is simple: You are making plans based on unknown events at pivotal moments. One of my mantras is "expect the expected." Lots of traders tend to expect the unexpected. For example, a trader will look at a trading channel that's been evident for the past three months and expect the stock to break out. The trader buys the stock in anticipation of the breakout and then takes a loss when the stock failed to break out. No thought seems to be given to the fact that the very existence of the channel is due to a repeating dynamic. And there is no predicting exactly when that dynamic will cease to exist....484 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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