What is the difference b/w a dime store economist and a college kid who just got an “A” on his/her economic 101 class?
Not much! Both are using “fancy” terminology to tell their stories of how the world’s economic system “should” be doing this or doing that; or why the economic system is not working because of this and that. And while both of them may be clueless to what is REALLY happening, they both offer their stories FOR FREE.
Now, what is the difference b/w a dime store economist and the economist whose work get published by the trade magazine? Nothing except one of them get paid handsomely while the other get nothing.
Ok, what has this got to do with us being a trader?
Simple, if you want to trade, STOP listening to the dime store economist and START listening to the price action!
What is even more harmful to your trading is when you become a dime store economist yourself!
Sure, you can have an opinion on the the current economic condition but the moment you “invest” into your theory, you are screwed!
Yes, how many wealthy economists do you see out there (not counting the ones whose salary are paid by the like of “too big to fail” bankers)?
The moment you INVEST your EGO into an economic theory of why the market should be doing this or doing that, you are NO LONGER listening to the market. You know why? It is because you just put yourself into another “I need to be right” mental mindset.
Good Grief! Now, you get two “I need to be right” in your market position:
I need to be right #1: My very logical economic theory
I need to be right #2: My decision on a stock purchase (or short sales) that is losing money.
As a trader, economic theory is just another “probability” that could be wrong!
As a trader, the decision to buy (or short) is just another “probability” that could be wrong!
And what do you do when you are wrong as a trader?
You get the FUCK out of your position to cut your losses FAST!
BUT you can’t do that if you have TWO “I need to be right!” mental mindset going against you! And if you are a more seasoned trader, these 2 mindsets will deter you from cutting your losses quickly!
Of course, this is just my opinion. And that is why I like to blog only “theory” about price action based on my chart analysis. It keeps me focus on what is important- what is price action doing today and what it is likely to do tomorrow? Anything further than a week and I may end up being a dime store economist myself!
My only antidote to becoming an accidental dime store economist by predicting price action further than a week is my readiness to admit to myself that I’m WRONG again!