Found this post on another forum and felt like sharing it. This post definitely reinforces what I have been learning and also served as a wake up call for some mistakes. I think many HSM members can profit from this
I think that it is impossible to ever 'predict' the movements of the market. Its funny, when people ask me something like "what do you think the dollar is going to do in whatever period of time", I always say that I have no idea. This sometimes causes people to look at me with disbelief, presumably wondering how someone who seemingly has such impressive returns knows so little about what the market may do. Ironically, it was that very realization - and figuring out to how translate that into a practicable, mechanical format - that finally afforded the kind of profitability that I wanted. And this is a statement that many, many traders would disagree with, which is precisely why I think that the vast majority fail to make significant money, and why the analysts seem wrong nearly as often as they are right.
When you first see that certain technical trading setups go a certain direction more often than not, you start to subconsciously believe that any such setup WILL or SHOULD go in that direction, instead of that it merely has a slightly higher than x% chance of going in that direction. It is a key distinction that most traders - including many great technical guys that I have known, who are able to expertly read the complexities of price movements, and who sometimes even give theoretical lip service to these very concepts - fail to ever substantively realize, or at least effectively put into practice.
It is ultimately about ego. So many get caught up in trying to be so clever with their charts and indicators, in an effort to win all the time. I certainty did myself, reveling in my winning trades and chastising myself for the losers. "I should have seen the resistance at 1.3729, and it was obviously breaking out of the trend line, especially when I draw it like that. How could I have missed that factor - I'll never make that mistake again." This, however, implicitly assumes you are somehow responsible for that loss; that you were somehow ever actually in control of what the market was going to do. It is a dangerous mentality to have, and one that is unfortunately born from the equally instrumental realization that you can actually make money from trading the market.
I even think the basic tool of drawing a support or resistance line on a chart is potentially hazardous, as its exact placement is really so arbitrary, but once you put it there it suddenly seems so authoritative - like a constraint that you have craftily imposed upon the market. I prefer to passively OBSERVE concepts like support and resistance in the functioning of my systems, rather than trading based on my imperfect, arbitrary, and surely biased understanding of their specific placements.
Unlike many traders, I don't even set targets for trades, since I believe that even that would be forecasting. I exit the trade reactively when the market tells me to. It could be at a large profit, a small profit, breakeven, or a small loss - and I couldn't care less about which one it turns out to be on any given trade; only that the statistical outcome over many, many trades is within the appropriate range. One of the shrewdest statements that I ever heard on this was that the only way to make a million dollars in trading (as opposed to investing) is to make 10 million dollars and lose 9 million dollars (in concept, at least: some of you may well be making 10 million and losing only 8, or 7, or 6.2...)
In essence, one could view this as a debate between proactive and reactive modes of thinking. In many - if not most - areas of life, proactive behaviors are rewarded. CEOs and heads of industry are generally proactive people - decision makers who exercise control over their situations and environments. It is the reactive people that society generally doesn't reward: the guy who waits for life to present him an opportunity rather than actively trying to create one. I myself am a control freak - a trait that served me well in life until I encountered the insanity of the markets. I wanted so desperately to control them - to be smart, to be right, to win, to see the complexities in a movement that others 'foolishly' missed and bask in the resulting accolades - and nearly drove myself crazy in the process.
My closing advice is not to do this, although I think it is almost an inevitability of the learning process - I am forever envious of those that don't have to go through this, or who can somehow consistently profit from it. In short, it is understanding that randomness and making money from the market aren't nearly as mutually exclusive as it would intuitively seem. To the diversified 'buy and hold' guys as to many an active trader, they are seemingly incommensurable opinions - but I have found that it is a complete surrender to the randomness of any one trade that allows for a grounded confidence in a statistically significant outcome over many instances.
Best of luck,