The right edge

When talking about technical analysis, one major component is reading graphs... From various indicators, we try to determine the market trend and movement. We have indicators as volume, moving average, RSI,.......... sound complicated enough? Hehe.... Wait till you read the real difficult part...

As we look at the graph, we look at previous price and performance. To identitify the trend from previous performance is hard enough, but that is not the most difficult part. The worst part is the right edge of the graph. The more to the right, the harder it gets... To complicate the problem further, most indicators tend to give contradicting results when you needed them the most.... Sigh....

The past is solid and fixed, but the future is fluid and volatile. And we have to make decisions on the future instead of the past. So, in order to do it right, we need to be flexible and make your decisions based on probabilities.... However probabilities is not as simple as simple calculations... The probabilities to make mistakes is actually quite high... So, you can either wait for confirmation to increase the probabilities to get it right. But then again, even if you wait for confirmation to come, you can never tell if it is going to make a sudden turn in the trend...

This is the reason why before you decide to make any trade, the first thing that you need to do is to have a stop loss plan. Just in case your decision turns out to be wrong, you need to keep the loss as small as possible... So the most important mentality is "Keep the loss small and let the profit run". You need to keep the loss as small as possible in order for you to survive long enough to win... And in this way, you can increase the odds of you winning... So remember, NEVER EVER enter a trade without a stop loss plan....