Anticipation: Just Don't
"There is no sense in trying to anticipate what the next big movement is going to be."
For the next few weeks, we will be using quotes from Edwin Lefevre and his masterpiece trading book, “Reminiscences of a Stock Operator.” Enjoy!
It’s a boring, and costly, road riding a stock going nowhere.
Bad At It
As humans, we love to think we are good at anticipating the future.
Take our oil for example. Who would have thought that from March 1st to March 7th oil was going to crank up nearly 40%.
The reality is, oil companies didn’t, the government didn’t—no one could have known that a global event was going to happen.
Yet in hindsight, many people have been talking about the impending oil crisis for a while now. They didn’t really know when it would happen, or how it would happen, but that the stage was set for it to happen.
Anticipation in Stock Trading
Now, in stock trading, this is a good lesson. It’s not that anticipation is bad, it’s just that, though we may be right on the eventual outcome of a stock or commodity movement, the timing may be off.
And it can cost us a lot of money.
Our master teacher Edwin Lefevre says it this way:
“In a narrow market, when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be—up or down. The thing to do is to watch the market, read the tape to determine the limits of the get-nowhere prices, and make up your mind that you will not take an interest until the price breaks through the limit in either direction.”
-Edwin Lefevre
There are countless stocks or commodities that, if we anticipate their movement and put money into them today, could take months, years, decades, or even may never break out of these trading ranges.
Our money has time value. And we save ourselves money when we wait for the right time to get into a trade, instead of trying to anticipate a direction before the direction has become obvious.
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