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Trading with a Flexible Mindset

Last updated 1/15/2012 4:14 PM EST (GMT -5) 0 Comments - Add your comment

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Bradley W. Gareiss

Technical Analyst, GFT

Trading with an flexible mindset is a critical skill that all traders must learn.  While this may seem elementary, consider how often you hear the media label a trader, a firm, or even themselves as a "bear" or a "bull".  To me, this makes almost no sense.  Let's say that you considered yourself to a "bull" for the USD, or in other words you thought the dollar will rise in the future.  To me that is a totally empty definition.  Does that mean your think the USD will go up forever?  Will it go up for the next week?  Will it only go up if the pair first drops one hundred pips to a line of support?  Without more details in one's opinion, stating that someone is "bullish" doesn't give us much information.  Don't get me wrong, occasionally I will use terms like that, but I always try to define a context that describes the nature of my opinion.

However, many people still will say they are bullish for a given currency pair with no further explanation.  Let's say that you are one of these people, as I suspect many readers are.  In my opinion, this is a problem.  The reason for this is that you have formed an opinion before you analyze the facts.  For instance, I am a Chicago Bears fan.  Because I want the Bears to win so badly (similar to someone holding a long position wanting the pair to rise), I find myself irrationally thinking that the Bears are better than they are.  With that being said, I think Jay Cutler is going to be much better this year.  So even though I know my bias changes my opinion, I simply can't help myself.  For sports, that is just a form of entertainment, and an opportunity for my non-Bears fan friends to taunt me.  However, in trading, there is a lot more on the line.  If you have a general opinion before you actually analyze the current situation, then you are viewing the information without the benefit of a rational mindset.  This may seem strange to hear, but it is true.

Don't get me wrong, if you have a current opinion that currency pair is likely to behave in a certain way due to your analysis, that is fine.  But many traders form open ended opinions on currency pairs and then try to find analysis that fits into that opinion.  Let's say you consider yourself to be generally bullish on the EUR/USD.  The reason for this is that you think the Euro "looks better" than the dollar. 

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