Trading forex, stocks, options, futures and crypto all require dealing with uncertainty – along with many other skills. Why is that? Why is dealing with and understanding uncertainty so important when it comes to trading stocks?
Well…. ultimately you don’t know where the price is going or what the market is going to do. Fundamental analysis will tell you that the price might be going up or down based off an event in the news. Technical analysis and indicators will reveal a change in the trend – allowing you to buy or sell at a certain point.
All of these things help, but when you’re in a trade you have to deal with the uncertainty of how long a winner will run. The uncertainty of where to enter into a trade. The uncertainty of whether a trade will turn around.
Everybody has their own way of trading – there are traders out there who are more comfortable with being in a drawdown for an extended period of time. On the other hand, there are traders out there who hate being in a drawdown and would rather cut their losses every quickly. Personally, I like to cut my losses quickly.
Anyway, when it comes to dealing with these emotions of not knowing what the market is going to do, it’l take practice to understand and experience the nature of the market. For a newbie, staring at a computer screen guessing where the price will go might seem easy… until the price goes in the opposite direction… which might cause them to lose a lot of money.
An experienced trader knows to use risk management on every trade, an experienced trader also understands breakout zones, resistance levels, support levels and how to stay calm under pressure.
So… ultimately…. we can only guess where the price is going to move. There is no certainty, otherwise we’d all be millionaires and billionaires… HOWEVER, you can read the indicators, the support / resistance levels, the trends, the high points of the day and the low points of the day…. and most importantly,… to cut your losing trades quickly.