This is a continuation of the Trading Words of Wisdom By Yoda, for Quote #4 click here.
“Difficult to see. Always in motion is the future” -The Empire Strikes Back
While Yoda is training Luke on Dagobah, Luke is troubled by a Force vision of his friends, Han, Leia, and Chewie, in trouble in Cloud City. Luke, clearly worried, asks Yoda if his friends will die. For a moment, it appeared that they would, but we’ve seen the movies. We know that they are rescued.
People, it seems, always look towards the future. We try to predict and plan ahead, and our predictions are based on our experiences. In the markets, we try to forecast. Forecasting is an important function while trading because creating a forecast based on past data can indicate how your trades will do.
We naturally look for patterns in life; I remember as a little kid I’d time my strides so that I would step on every blue tile on my elementary school’s patterned floor. With my eyes glued to the ground, I knew my foot would need to pass over one white and one gray tile to land on the next blue one. I kept this pattern for a while until I set my foot down expecting a blue tile only to find I was on a smaller checkered white tile. Disoriented and confused, I looked up and realized that I turned the wrong way and had entered the lunchroom. We trade based on our forecasts, so when we see the market straying from where we’ve predicted it to go it’s an indication that something might have changed or been wrong with our trading plan. By recognizing this early on, we have time to get out of the trade and review our strategy without major losses. Just like how seeing the smaller white tile instead of the blue one that I forecasted got me to look up and realize I was lost, your forecast can indicate how well your trading plan is reflecting what’s really happening in the market. Yoda is right, the future is difficult to see; that’s why forecasting and being flexible is a meaningful operation to help you in the markets.
Good Luck, and May The Force Be With You!
For the next quote click here.