“Do not trade until you can confirm that the market has turned” (from The Psychology of Magicians)

If one could accurately predict the market’s top and bottom, that would be remarkable, but you should not trade until you can confirm that the market has turned. It admonishes against trading against the trend. Based on Dow Theory, the trend is believed to continue until a trend reversal is confirmed, which I think is a sound trading perspective. In conclusion, it says “target the pullback after a breakout” and “seeking a pullback (pullback or retracement) is the correct approach.”

I want to be a pure trend follower too, but sometimes I also engage in contrarian trades (laughs).

To “predict the top and bottom” means aiming for the extremes, so it evokes scenes where one looks for reversals at notable highs and lows. If it doesn’t reverse, there’s a good possibility the momentum will continue strongly.

If you’re aiming for a market bottom or top, you must cut losses properly.

I don’t want to experience the fear of grabbing a falling knife.

Rarely, I do manage to catch the bottom or top, but for some reason I can’t hold onto it. I want to take profits quickly. Catching the top or bottom feels nice but doesn’t yield much… which may mean this is a low-cost, low-efficiency trade for me. I feel psychologically pressured at entry as well… perhaps it isn’t a good fit for me.

Well then, until next time.