You know when you are using a comparison website for your car insurance and you get offered ‘breakdown cover’ for ‘only an extra £30’? Sometimes I add it to the cart thinking ‘that seems good value’ and I buy it.
The car then breaks down, maybe on the continent, and you realise, after waiting for hours in the sun for a breakdown truck for hours that only materialises after eight hours and ten phone calls later.
With each phone call you are speaking to a different operator and you realise that they are just students earning extra money between lectures. ‘Good value’? Not!
I regard the sell and buy signals that I get that chop me in and out of a non-trending market as insurance. I don’t know which signal will be a ‘false’ signal that will cost me to have got into a trade that then reverses. I don’t know which signal will then turn into a trend that then leads to a profitable trade. All I know is that it is much easier to follow the signals to open or close a trade than it is to try and to decide which signals I am going to ignore.
I have a signal this week to exit a trade that I opened recently. Part of me wants to ignore that signal and stay in the trade. The problem is that if the price keeps dropping and I close the trade at some stage in the future, I will lose money
I have to regard false signals and following a ‘choppy’ market as insurance. It’s just part of the price of trading this way.
Have a look at the video and see which trade I am closing this week!
I’m on holiday for the next couple of weeks so the next few videos that I do will be a very different format, most likely. If you want to ensure that you are up to speed with what I am doing you might like to follow my Facebook page!
Car photo courtesy of Agathe LM (on Flickr) (an Opel GT, I think. Great car! Except if it broke down, of course)