Once upon a time there was a group of traders who let emotions dictate their next move in the markets. These traders were an emotional bunch who felt a wide range of emotions from despair to euphoria.
The bulls were giddy excitement when markets rallied and continued to buy into the rally without regard to time or price. They knew that they just wanted to buy and buy knowing that the markets would never go down again. The bulls went shopping buying things with their new found wealth and never gave a thought to protecting their good fortune. The bulls turned into pigs and we all know what happens to pigs -- they get slaughtered.
When markets are collapsing the bears take on the same emotion as the bulls when markets rally, they celebrate their victory with new purchases while pressing their luck with continued selling, knowing that this time is different and the markets are going to zero. They forget how they felt when the markets were rallying against them. They are filled with hope from the new found money; they don’t take the time to lock up their profits. The bears have magically turned into pigs and they get slaughtered.
The moral of the story is simple -- whether you are a trader, farmer or producer locking up profits is the key to success. Markets will go up and markets will go down. There is always money to be made by the bulls and the bears if they stay away from turning into pigs. The markets and their psychology never change. Big bull markets are eventually met with sellers and big bear markets are eventually met with buyers.
There is nothing new in any market and this time is not different. Market cycles are determined by price and human emotions and in the end profit protection is the key. High prices will always cure high prices as low prices will always cure low prices, especially in the commodity space.
If you always protect profits and live by these words you will stay ahead of the game and away from the emotional roller coaster of trading, speculating, investing and farming. Keep your emotions in check and your opinion out of your decision making, it’s always about the money.
The bulls get a little, the bears get a little and the pigs get slaughtered!
Keep those stops tight!
The views, opinions and positions expressed by the author are theirs alone and do not necessarily reflect the views, opinions or positions of Pro Farmer.
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