Value in waiting and CSW
In recent weeks I’ve been thinking about whether it makes sense to wait on a pull back on an uptrend to enter long.
Some conflicting thoughts came to mind:
- Waiting means I could miss the ‘boat’.
- But importantly I lose nothing.
Thinking about this more deeply, I think losing nothing is far more important. There may be a sense of loss in missing the boat but actually I’ve lost nothing in missing the boat. No losses in this business means one is winning!!
Trying to catch the boat early carries greater risk of loss. The charts below are a classic example. There is an uptrend – but selecting a sound entry point with a reasonable stop-loss is not an easy one. There is a risk of the ‘coulda-shoulda-woulda’ phenomenon (CSW) taking hold when we see price moving off. CSW takes it’s grip in the future, after we’ve seen what has unfolded.
The profitable CSW is actually where there is a sound dip in a massive uptrend, with a sensible stop-loss. Yes – we’d stand to lose, as always. But it’s better to lose in a clearer sign of resumption of the uptrend than to chase the trend at a point where it could fall.
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