Trade Aptitude
Results of Monday’s Best S&P Turning Points: The suggested short @ 4157.00 triggered during the Globex this morning @ 5:45 ET. This trade is filtered out due to the CPI announcement @ 8:30 (the volatility is predictable, but the direction is definitely not).
Today’s Best S&P Turning Points (consider wider stops and less size in fast moving markets):
Holding off on selecting the turning points until the CPI is released and the volatility is assessed.
The World Sentiment Index: (+100/-100) RISES from +21 to +29 in a world of mixed sentiment and low volatility. Historically price closed down from the open 56% of the time with drops averaging 50% more than rises.
Catalysts: CPI @ 8:30. FOMC members speaking @ 11:00, 11:30 & 14:05.
Quick Tip: Lethal Bias
Have you ever looked at your trade result and said to yourself “If had a bigger stop it would have been a winner” or “If I don’t use a stop I’ll see more winners because this market just swings back and forth.”
What you’re experiencing is hindsight bias. It is the tendency to look back at an unpredictable event and think it was easily predictable. It is also called the ‘knew-it-all-along’ effect.
It's not uncommon to feel this bias. When you combine it with small sample size the pair become lethal. You see something unpredictable happen a few times and now you think you can predict it. Nope.
Don’t beat yourself up over these feelings. Do recognize them. The trigger words I’ve found that lead to these illogical biases are “coulda, woulda & shoulda.” Get in the habit of stopping yourself when those 3 words enter your mind or vocabulary. Analyze the situation for hindsight bias and small sample size.
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Trade Fearlessly,
Mike Siewruk