3 Powerful Trading Sayings That You Should Follow
In trading, there are clues and nuggets that the great traders before us left behind. We can use this knowledge to summarize and dissect how the markets work.
Funny enough, some of these sayings and clues only make sense when they finally make sense! Traders have AHA moments at varying stages in their careers and experience these realizations differently from the next trader.
Many extremely successful traders can tell you what their AHA moment was when everything finally made sense and they understood. They understood how to participate in the markets successfully and became profitable traders.
Some got it because they took someone’s course, and they learned something that finally made sense to them. Others put in an ungodly amount of chart time, and one day (like a switch flipped in their minds), they understood what they required to make money in the markets.
Before I continue, these AHA moments come way after learning your technical analysis and polishing your skills/ strategy. Don’t think these moments will hit you 2 weeks after you start trading.
1. Buy The Rumor, Sell The News
This saying is more for fundamental events but can apply to technicals as well. The phrase “Buy the rumor, sell the news” comes from a typical stock market pattern.
When good news is expected for a company, people buy the stock before the release because they expect the price to rise. Shortly after the NEWS comes out, price falls either because traders are taking profits or the news just wasn’t that big of a deal, so the market falls.
The EXACT same thing happens in the Forex markets. First, I want to tell you a story about the first presidential election I traded in 2016 (read the full story).
I spent the whole night and morning stalking price. When it looked inevitable for Trump to win the election, I put on a short position on USDJPY because I felt that the fear and lack of confidence in Trump would cause the dollar to fall through the floor.
I had to write a final exam that day, and when I came back, the price of USDJPY had skyrocketed. This move took me out of the trade, and the market went TWICE the size of my take profit in the other direction.
But HOW? What changed? What happened while I was gone? Well, it turns out Donald J Trump started talking about tax stimulus and increasing employment.
As a result, the dollar gained so much strength over the next 2 months that even a hamster could have made money buying USDJPY.
That whole night price moved in one direction in ANTICIPATION of a particular outcome and just went the opposite way once the news came out.
The 2020 presidential race was a special one with COVID in the air, literally, and a new push to use mail-in ballots, which meant people could vote BEFORE election day. The specifics are not important.
What I want you to know is that the EXACT same thing happened 4 years later. USDJPY rose 50 pips on November 3rd and fell 200 PIPS right after! And the president wasn’t even elected yet!!
When Biden was finally elected, the price went 250 PIPS back the other way! (Up). And that is why great traders say, “Buy the Rumor, Sell the News.”
2. The trend is your friend…until the end
See what I did there? Most traders know this, but not too many apply it, and even fewer move on after it’s ended. “Until the end” does not mean FOREVER boys and girls. It means when the trend is over, find a new one!
Nobody is going to judge you for switching teams in this market! In fact, the goal is to make sure you’re on the right team. How do we know when it’s the end?
Well, how do we know we’re in trend?
- Higher Highs and Higher Lows = Uptrend.
- Lower Highs and Lower Lows = Downtrend.
The moment that is not happening anymore, it’s over!
Trendlines do not dictate trends AT ALL. They are just a guiding mechanism YOU put on your chart. The market’s highs and lows are undisputable. You can’t argue with what the market tells you is high and low.
A trader’s goal is to buy low and sell high. So use what the market tells you is high/low to make your trading decisions. The trend IS your friend, yes but…only until the end. Remember that!
3. If you fail to plan, you plan to fail
That’s not specifically a trading maxim, but it applies to trading as well. The trading version goes, “If you fail to trade your plan, you plan to fail.” This line should be etched in stone above your bed, on every single dinner plate you own, and even your doormat!
Trading is a battleground. The competitors are retail traders and institutional traders. Retail traders are like the guerilla army with pee shooters, fighting the institutional military with tanks and jets. No chance!
But you, my friend, must be the sniper. There are snipers all over the world who have found their edge and continue to use that SAME EDGE to mine a profit from the market.
That should be your goal. Find something that works and do that OVER and OVER and OVER again wherever you are in the world.
If you fail to consistently sit still and snipe pips repeatedly in the same position, you won’t make it. You will be just like the retail trader…NO CHANCE!
That is how important it is to follow your plan. It is crucial to your survival as a trader. You step out of your rules even for one week, forbid a month! You get clipped. Simple.
Whatever your plan is, stick to it! Traders who have had massive drawdowns and bad experiences from trading without a system need to find something that works and remove the fear of the past repeating itself.
The more you stick to your plan, the better the results. The better the results, the easier it is to stick to your plan. But you have to grit your teeth and bite the bullet for those next 20 trades and execute the system flawlessly.
Don’t bet the farm.
Don’t lose your shirt.
Cut the L.
Keep the W.