c16 JWBT016-Busby September 30, 2008 14:38 Printer: TBD
156 THE WILD CARDS
is that no one knows how the markets will trade. No one has a crystal ball
to gaze into the future. Sometimes prices move irrationally. In spite of eco-
nomic factors, there are times when prices take on a life of their own and
move in an illogical manner. Sometimes there seems to be neither rhyme
nor reason to the price action. It is unpredictable and surprising. There-
fore, keep an open mind and let the market tell you whether to be long,
short, or out.
Most traders have a bias. We look at the markets every day, and we
focus on the prices and the economic conditions that surround them. It is
only natural that we would have an opinion about the market’s sentiment
and direction. Having a bias is not a problem. Trading on the basis of bias
is a problem. Bias blinds you from focusing on the numbers. It gives you a
preconceived view of the market and causes you to make bad trades that
are not supported by the data.
I explained in Chapter 8 my strategy for trading the Fed rate announce-
ments. Those announcements are scheduled eight times a year. If you
watch prices just before the news is released, you will see prices jumping.
Traders cannot wait to place their trades. They feel so certain that they
know not only what action the Fed is taking but also the market’s response
to that action that they cannot keep their hand off the computer mouse.
They have a market bias, and they are putting their money at risk on the
basis of that bias. If you ever watch me trade the Fed, you will see that I do
not place a trade until the news is out and the market has shown me the
direction. I do not hope or guess; I watch prices, read the tape, and follow
the market’s lead. Using that strategy, I am able to make money.
Each day when you approach the markets, you may have an opinion
as to where they will go during the session. However, keep that opinion in
perspective and do not allow it to cloud your reasoning or affect your judg-
ment. Never trade on the basis of bias. Let the numbers and the indicators
show the way. Then follow. There is no problem with having a bias as long
as you do not rely on that bias for trading. In other words, have an opinion,
but do not trade on that alone. Have market confirmation for any trade.Be Disciplined
Electronic exchanges, computerized trading platforms, real-time data
feed—all of these innovations make trading easy. In fact, it is almost too
easy. Just click the mouse and play the game. Overtrading is the biggest
problem of most day traders. Because they spend most of their days sit-
ting in front of a computer screen, they feel compelled to trade. When they
are not trading, they feel that they are not doing their job. Therefore, they