BarroMetrics Views: How to Defeat the Dreaded “Ebb” III
Yesterday I said that part of the solution to the problem is to use qualitative stops – exiting trades because the structure, not price, suggests an exit is in order. Why is this more difficult that it sounds?
Paul provided the answer in his posted question; and, we find the solution when we solve this query: why do some traders fail to use price stops?
Answer: we want certainty that if stopped out, the market will not then proceed to move in our favour.
Since we are trading the right-hand edge of the chart, there is no such certainty possible. Indeed, the opposite may be true – it will almost certainly happen that, if we trade for long enough, our price stop will be hit, and the market will then move in our favour. The solution is not to avoid using price stops but to formulate a strategy for action when that does occur.
Now, if fear and regret raise their ugly heads when using price stops, imagine how much stronger their impact is when using qualitative stops?! It is ‘fear’ that stops us from doing what we know we need to do……
In that sentence, we have the two barriers to implementing the insight:
- We need to KNOW what to do (knowledge); and
- We need to DO what we know (skill).
In respect of the former, that comes with observation, reading and study; in respect of the latter, it comes with managing fear and anxiety. In this regard, I have found ACT to be immensely helpful, especially the ‘acceptance’ and ‘diffusion’ aspects.
I wrote about ACT last year in “It’s That Time of Year II“.
I’ll leave it to you to investigate the theory and apply to your trading. What is important is to know that for ACT to help, you must not only “learn”, you must also “do”. Just reading ACT’s concepts will not make you a better trader – for that to happen, you must also apply the ideas.