One of the most prevalent fears people have is the fear of uncertainty – the fear of tomorrow and the unknown. With the future already an unknown quantity, the Oxford boffins came up with a name for that anxiety that follows this unknown: “Chronophobia.”
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If given a chance, most people will like to have some power to control or at least predict what is going to happen. No one wants to be in the dark about tomorrow; this is an essential makeup of us humans.
For the trader, it is not different. If a witch appeared to you and gave you a chance to ask for something, you are probably going to be asking for a spell that will make you able to predict the market. You wish you could know when Bitcoin is going to have that next bull-run or the next time Bitcoin’s price will drop below $5,000.
You want to know when Facebook’s Libra will eventually scale the numerous legislative hurdles facing it and become the next big thing. If given a chance, you want to wield some measure of power that will help you predict where the market is going.
This desire to be able to predict the market has affected many traders and has slipped into their minds when they trade. Too many traders are trying to predict what is going to happen next, but the truth is that no one knows where the market is going.
No One Really Predicts the Market
The truth is that the market is volatile and things change quickly. There are so many variables changing all the time. Even the brightest market analysts, professors, and market enthusiasts, even the most powerful computers, have been trying but cannot get it right 100% of the time.
With so much data analyzed and poured over, we are still far from being able to predict the market. We see automated algorithms getting it right a while, and then they stop working. In this case, you don’t say the machines have a skill in predicting the market because they cannot do it consistently. For example, if while tossing a coin, you can guess five out of ten times what part of the coin will face the ground, do you call that predicting? No way!That’s luck.
Prediction Equals Disappointment
Since we or the machines cannot get it right, it is safe for the trader to come to accept that no one knows where the market is heading. It matters what you believe because it affects the way you trade.
If you think that you can predict the market, you are more likely to want to forecast the market and making decisions based on your predictions. Now, let’s say you predicted that Bitcoin’s price would stay on the $10,200 mark for four days – and it happened.
What this will do is that it will make you believe is that you can always predict the market going forward? You will begin to trust your ability to get it right with your prediction and, most likely, tailor your trade to your predictions.
This is dangerous for a trader because there are two outcomes from predicting. Either you get it right, or you get it wrong. When you get it right, you can make a few quid off that, but if you get it wrong, you are probably going to lose a lot.
Knowing is Not Equals Success
Trading success is not about predicting where the market is going. So many traders are finding little success trying to predict where the market is going because that is not what they should be doing.
Even if you can guess the market, there are so many variables that can work against you. Your chances of success may be higher if you know where the market is going, but that in itself does not guarantee you anything.
It is About Risk-Reward Ratio
Trading success is about having an excellent risk-reward ratio and a better than 50% chance of success. If you want to succeed, the blueprint is to have a good risk-reward ratio and a healthy chance of getting in right in any given trade.
Your job is not in predicting. Your job, if you are taking trading seriously, is to look for a deal where the risk-reward ratio is favorable. You have to have things lined up that give you a high risk-reward. You are looking for trades where the risk-reward is beneficial for you.
The idea is not to predict, but to find a trade where your chances of winning are high. You don’t have to worry yourself about where the market is going or not going, instead be on the look-out for trades where your chance of success is high.
Look for trades that are favorable for you. If your success in predicting the market does not translate to a winning trade, your prediction is useless. What you want is to be involved with trades that bring in reward consistently.
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