The Coast is Never that Clear

By Michael Melissinos

Just when you think you’ve got the wind at your back and nothing can go wrong, the markets will likely deliver a healthy dose of reality.

You can never get too comfortable in this game. Like the old Atari game Asteroids, it’s our job to move out of harms way and manage the damage.

In the markets, visibility is typically foggy. You never know what’s lurking out there. Even on bright sunny days when it feels like you’ll never stop making money, remember that you can only see as far as the horizon. There are risks just beyond waiting to surprise you.

And when you focus too much on one area, risks can sneak up behind you or even lurk right beneath your nose. Head on a swivel at all times.

Our psychological biases often blind us to risks. At our core, we don’t want to believe something bad can happen. We believe we’ll be lucky. We don’t want to change our minds. We picture a nice smooth ride without any real hiccups. Sadly, that’s just not the way it is.

So, what risks are lurking today? What could beyond the horizon or hiding in the fog?

The advantage of being an non-opinionated trend-following trader is that you’re willing to accept that anything is possible. You know that you can’t possibly know all of the risks or what’s going to happen next. This way, you’re able to take things as they come and prepare for the worst.

You’re able to go with the flow without judging current trends as ridiculous or thinking that they cannot possibly last. You’re able to prepare for many different risks beyond your imagination.

When you hold strong opinions, about the markets or your investments, you’re blinding yourself to the potential risks. You’re unknowingly making the coast foggy. Therefor, clouding your judgement and the ability to observe what is.

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