Emini Day Trading Lessons: +6.75 – Be Careful About Your Market Bias
I sometimes think that the thing many traders struggle with the most is bias. They convince themselves that the market simply has to go in a certain direction or a trade will practically guaranteed to go their way and they block out all information to the contrary.
In extreme cases, the reality check doesn't occur until what should be a small loss spirals into something massive and possibly account-destroying simply because the trader held to their bias while throwing reason out the window.
A One-Way Train?
It's days like today where it's easy to be convinced that the market can only go one way and that's to the upside. We are breaking into new all-time highs, a couple of trading days in a row have closed near the daily high, and even the pre-market gave us a nice run up before the NYSE Open.
In the long-term you're probably going to be right to have a strong bullish bias but as a day trader that biased approach would have likely meant taking losses on longs, missing out on quality shorts and effectively fighting the morning flows despite the price information available.
However, if a trader is open to anything being possible in the market at any time and is willing to be adaptable if the situation demands it then they likely took advantage even as price didn't cover a lot of ground.
Keeping an Open Mind
This isn't to say that there is no place for planning in advance and detailing the scenarios that are most likely to play out over the day. There's value in having a strategy in terms of how you want to trade and anticipating in advance how the market might react at key areas.
That said, a trader needs to be prepared to change their mind and work with the new price information as it becomes available.
As the saying goes, the market is always right. Or if you prefer, price is king. What they say goes and it doesn't really matter what you think or how strongly you believe your specific scenario will play out. They just do what they do whether you're along for the ride or not.
- Strike While The Iron is Hot - March 1, 2021
- The Path to Becoming a Full Time Trader - February 22, 2021
- Looking to 2021 and Beyond - January 20, 2021
