Top 2022 Trading Lesson: Don’t Try and be Clever – Stick to Your Guns

This year (2022) has been dominated by one theme which has driven all markets, the Federal Reserve finally accepting that inflation had got completely out of their control and that a series of sharp, and regular, rate hikes would be required to bring price pressures under control. Higher US interest rates lead to higher short-term US Treasury yields, a stronger US dollar, a bearish outlook for tech stocks and the Nasdaq 100, and a negative backdrop for gold. None of these moves are new, higher rates always historically produce these market reactions. So why, when the trend is evident, can following a clear plan be difficult? My 2022 lesson, trying to be too clever.

When you see an obvious trend you can be lulled into a false sense of security, you start thinking that something that is so clear to you can be finessed by you, that you know better than the prevailing market and that you can get a better entry price. So while you wait for your ‘perfect entry’, the market starts to move against you and that’s when the trouble starts. You know the trend but you aren’t in the trade – I was trying to be too clever in my entry that it kept getting away from me. Then you have to reevaluate - getting your new entry and exit levels in place - while the market is moving in the way you expected and away from you. Even worse you get a case of trader paralysis, in this case, you don’t want to pay a higher price to enter a trade because you know you had the opportunity to get in earlier and at a better price. And you missed it.

If you see a trade and it meets all of your criteria, take it, don’t try and be too clever and get in at a marginally better level and miss the trade you planned.