Perception and Trade Management

Trading chart patterns is an inexact science. Two smart and experienced traders can view a chart in very different ways, based on their biases, mental makeup, psychology and a variety of other factors. Let’s take a look at SWN:

An argument can be made for three different chart patterns. One with a bearish outlook might see a double top forming. A bullish position trader may argue a trend is in place with a buypoint around the moving average. A more aggressive swing trader would note that an NR7 has printed and the time for entry is now.

Who’s right? I don’t know. What’s more important is which trader will manage the trade better. If you want to have a long and productive trading career, you must be obsessive about managing your entry exit and risk. I would rather be the guy who was wrong about this pattern but only took a small loss, than the guy who nailed this trade, exited too soon, and used too wide a stop on his next trade.

2 thoughts on “Perception and Trade Management

Add yours

  1. Excellent post. All three are possible but it is the broad market that will determine the short term move. Personally I think the uptrend is still in tact but I will wait for it to come back to moving average.

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