PREDICTING VS REACTING
Hi, guys. Where do you think Bitcoin will go next? I bought at $33,000 as recommended by a Youtuber “XYZ” and I am shitting myself now. Should I HODL or dump it now? Any advice much approved 🙏
Posted in a trading forum
Amateurs predict. Professionals react.
Beginner traders always want to predict. They want to force their views of the market onto the market, and they think they know why something will happen. There’s always some fancy story involved. A new trader is trading off a belief or recommendation and has no real exit plan because they are sure that they are right. Obviously.
Very soon they will find out that the market does not care what YOU think.
If you ask a professional trader: “Where do you think the market will go next?”, the answer will most likely be “I have no idea!” For a new trader, this might sound ridiculous, that this trader is hiding something or not revealing his trade secrets. But the truth is that traders who make money in the markets are not in the game of predicting what the market will do next; they are in the game of reacting to the market.
Professional traders can make money from the markets because they are very flexible and they have no strong opinions about any direction of the market. They are just sitting and waiting for trading opportunities that their positive-expectancy system generates.
Professional trading algorithms must work in the same way. They don’t try to forecast or predict any outcome, market direction or market price. They simply react to what is happening in the markets right now. An algorithm spots a particular market pattern that it has seen a hundred times before and this pattern has a positive expectancy? Great, let’s place a low-risk trade and calculate a safe place for a stop, basing the target on statistics. Rinse and repeat a thousand times. Along the way, adjusting the pattern expectancy based on trading outcomes.
This is the holy grail of Algo-trading – not a magic AI super-algorithm with 95% predicting accuracy, forecasting, or recommending trades to naive traders. People gravitate toward things that promise easy money for no work. That’s human nature. Sadly, the things that work also require a lot of work.