Trading is not about correctly predicting future earnings or interest rates. It’s not about correctly drawing support and resistance levels, predicting what the price will do when it reaches them, or predicting a target price.
All these things and more are for the talking heads, shills, and entertainers. For a trader, there is no reason to speculate about them. Be agnostic. There is only one way to find out what will happen — live long enough and see — but it makes no difference in your trading.
Trading is about one thing only — finding the investment with a high risk-adjusted expected return (RAER). Someone could argue that knowing a million other things might help you better estimate RAER. That might be true, I don’t know, but that’s not relevant, since you do not know these other things — you have to estimate them too. You end up trading on an estimate that’s based on speculations about the future, which are inaccurate and are necessarily colored by your desires and fears.
Instead of pretending to know what you do not, make peace with the reality that any RAER calculation you make is an estimate, and attempt to make it the best possible estimate by using the only hard data you have — current price action. That in itself is a difficult task. You do not need to make your life even more difficult by attempting to predict irrelevant things.
Dear Friends,
