by Rick Ratchford
While the Futures, Commodity and Forex markets are made up of many people called 'Traders', who breathe, think and act, the market as a whole does not. Yet, we as traders often refer to the market as if it is a living, thinking being.
"What is the market saying?"
"Oh, the market ran my stops."
"Why does the market keep doing this to me?"
And many other statements and questions that seem to give a life to the futures and forex market itself. In fact, I've heard many futures traders make the comment that the market is out to get them! Now how absurd is that?
Yet, in a sense, the futures, commodity or forex market is in fact "saying" something to us in the form of price action data. Not as a 'thinking' entity, but rather information that represents the total actions of every trader who individually are 'thinking' entities that has participated in the market for any given moment.
Normally this information is transmitted to us in the form of price ticks. These ticks are further processed into price bars for various time frames and then displayed on price charts for analysis.
When all this information about the trading market is being analyzed, some 'message' is being conveyed. This is what the trader would refer to when asking "what is the market saying?"
The markets are always producing information. That information is always what "has" happened, not what "will" happen. The trader, on the other hand, will take this information and then arrive at some bias or belief as to what "may" happen, or what "should" happen, or "will" happen. No two traders are likely to come to the same exact conclusion although the market is providing them all the same information.
The market itself is not out to get anyone. It doesn't care what you or I do. It does not seek out to destroy you, nor does it have it out for you. Also, the market is not looking to gift you either, nor rise you above everyone else. The market is neither giving to you or taking from you.
It is very important to understand that the market is just there. You can buy or sell anytime you like at the going price. You can end your trade anytime you desire.
Once you realize that the market is not a thinking entity that has an evil streak that doesn't want you to succeed, you can learn to trade "in the moment".
Winning in the Futures, Commodity and Forex markets as a trader requires that you first accept that ANYTHING can happen. Analyzing a market for a potential trade is not to arrive at a "sure thing". In other words, when you are analyzing a price chart for a trading opportunity, you are simply looking to find an "edge" in order to put the odds in your favor. Successful traders simply understand the meaning of "probability" as it pertains to trading, and they exploit this.
Suppose that you have determined that a particular market has put in a low at support. Based on your past market experience and your approach to analyzing the market, you believe that the "probability" is good for price to now move up. Therefore, you have a "bias" that you wish to express by putting on a BUY trade.
To be successful as a trader, you must come to understand that price may or may not move up. You must understand that "ANYTHING" can happen. Thinking that the market "will" do what you expect will only paralyze your mind from accepting information from the market that clearly indicate it is not going to do what you expect. Thinking the market "should" do what you expect is putting demands on something that does not understand demands because it cannot think...it just is. To give your mind the best chance of being receptive to important information being conveyed by price action is to simply consider that the market "may" do what you expect.
No matter how accurate a timing method one might use, it is important that the trader realize that this is simply to put the odds in his favor and nothing more. There are no guarantees of being correct, nor should the trader assume beforehand that he will be correct. As long as the trader does not put requirements on the market in the form of "will" and "should", but rather "may", the trader will be more receptive and able to act appropriately when the market starts to indicate that the original expectation is likely wrong.
Being receptive to all the information being conveyed by price action allows us to cut our losses short. It also allows us to not be affected by taking small losses. As long as we do not put on trades with the attitude or thinking that we "will" make a lot of money on any given trade, or "should" win and do well, we will accept whatever the opportunity affords us.
So in conclusion, we analyze a market based on our rules in order to determine if an opportunity exists based on probability. We can then enter the trade with the understanding that at that point ANYTHING can happen, that there are no guarantees that the market will play out as analyzed, and we will accept whatever happens.
We will have pre-determined where the market would have to move to in order to consider our original assessment as incorrect, and be prepared to exit at that point without any thought that the market is out to get us, or perhaps our original assessment for being wrong can be modified on the fly.
The market does not have to do anything we want it to do. It does not have to repeat any action that it may have done in a similar situation in the past. It is not out to get you or reward you. When all your experience of price action tells you that the market will likely do this or that, the market does not care.
The market simply is.