Market Manifesto

The psy­chol­o­gy of con­ges­tion exit is the psy­chol­o­gy of depar­ture.

Its char­ac­ter­is­tics are oppor­tunism and watch­ful readi­ness.
The dan­gers are sloth, which is the refusal to accept grace, and fear, which stymies action.

Real­ly, how could it be oth­er­wise? After all, in con­ges­tion exit we leave the known, and we embark upon the unknown.

In doing so we must vio­late the bound­aries of nor­mal­i­ty that were so good to us in con­ges­tion action. We step out now afresh, in search of new lim­its, mov­ing first into that are­na where lim­its have not yet been set.

What enables us to take this action? How do we retain our bal­ance and our equi­lib­ri­um under these new con­di­tions? What are the threats and the dan­gers that lie await­ing, ready to take our mon­ey and trip us up?

Prepa­ra­tion is all.

If we have a para­chute, we can jump from a per­fect­ly good air­plane, and do it safe­ly. If we don’t have a chute, the time to dis­cov­er this fact is not just after the dive-mas­ter says “jump” and we take a fly­ing leap into thin air.

When we embark upon a trip to any new place, we pre­pare. We plan. We pack the tools and equip­ment we need. We men­tal­ly rehearse the trip. We get ready.

If we make our­selves ready for the pos­si­bil­i­ty of a new trend, we can make our con­ges­tion exit trad­ing very, very suc­cess­ful.

But if we are ill pre­pared, and unaware, and unready to accept the good­ness that the mar­ket is about to devolve upon us — well, then, all we can say is that bad things can sure hap­pen in a hell of a hur­ry.

Bad things do some­times hap­pen in trad­ing, and they often hap­pen because we rely on the nor­mal when the abnor­mal is occur­ring. We want to zig and the mar­ket wants to zag. In such a con­test of wills, the mar­ket always wins.

As a begin­ning trad­er, our prepa­ra­tions should be method­i­cal, metic­u­lous, com­plete, and relent­less. As a more expe­ri­enced trad­er we need less of such con­scious prepa­ra­tion.

When we went to sum­mer camp as a child and our moth­ers went down the check list of the things we were to take along, we checked them twice, three times, five times, and exam­ined the bat­ter­ies and the child’s flash­light and the extra socks and shorts with great care. Super duper prepa­ra­tion was the rule, because we were novices and we want­ed to do as well as we could, and be as per­fect­ly pre­pared as pos­si­ble.

As expe­ri­enced adults today we can whip togeth­er a trav­el­ing bag suf­fi­cient to three weeks in a quar­ter hour, because we know what we will need to meet the chal­lenge ahead. We’re pre­pared, but we’re effi­cient in the prepa­ra­tion. We know what we are about.

As an adult trav­el­er, or as an expe­ri­enced trad­er, we are in fact wary of too much prepa­ra­tion. Over­cook­ing prepa­ra­tion can kill aware­ness, and it will shift the focus of our atten­tion from the upcom­ing event to the prepa­ra­tion for the upcom­ing event. The train will leave the sta­tion while we are still pack­ing. We’ll miss the trade we’re get­ting ready for.

When we think con­ges­tion exit might be hap­pen­ing, and then we see that it is hap­pen­ing, we are pleased, and we let it hap­pen, and we step on the train, and set out on this new jour­ney. We fol­low along, and let what is hap­pen­ing, hap­pen.
When we have the prop­er atti­tude, we are ready, and we are aware, and we are relaxed, and accept­ing of what the mar­ket is offer­ing us.

In short, we grab the oppor­tu­ni­ty when it occurs. When the sig­nal is there, we are ready. We are oppor­tunis­tic. We take the trade at once because we know that such sit­u­a­tions are fleet­ing and such chances do not occur every day. (Well, actu­al­ly they do, but that is anoth­er sto­ry.)

In con­ges­tion exit trad­ing, did­dling around until things look a lit­tle more reas­sur­ing, until there is some kind of con­fir­ma­tion, until we are in some way more com­fort­able, is wrong. Hes­i­ta­tion is a trad­ing error, and you must work to elim­i­nate it.

If you find your­self bedev­iled by hes­i­ta­tion, then chances are you are expe­ri­enc­ing either sloth or fear.

Sloth is one of the sev­en dead­ly sins and it is out of fash­ion to speak of sloth these days. Most peo­ple do not rec­og­nize sloth when it sits next to them at the din­ner table, or perch­es on their trad­ing mon­i­tor. We take a tra­di­tion­al view of sloth, how­ev­er, and say that sloth is not lazi­ness or sloven­li­ness, though it may hide with­in those char­ac­ter­is­tics. No, for us sloth is the refusal to accept the good­ness and pos­i­tive out­come that the mar­ket is offer­ing you in this rich, preg­nant moment, that moment when the mar­ket tells you that con­ges­tion exit is upon us. Some have observed that peo­ple are unwill­ing to give up their suf­fer­ing. This is sloth in full bloom. Should you detect sloth in your actions, or more like­ly in your inac­tion, beware. It is not called a dead­ly sin for noth­ing.

Fear is the oth­er main ene­my of con­ges­tion exit trad­ing. If we fear tak­ing a posi­tion, we will delay our action until oth­ers join the move and their pres­ence gives us bor­rowed courage. We call it “confirmation” and pre­tend that our actions are pru­dent, that it is safer to be sure, that with the new trend under way we have less like­li­hood of error.

Actu­al­ly, the reverse is true. Hes­i­ta­tion cre­ates more dan­ger and does not reduce risk. As more traders join in on a move, the chances of sell­ing sup­port or buy­ing resis­tance increase, and we risk falling prey to all of the clas­sic trad­ing errors.

Fear inhibits action; sloth argues the action is unwor­thy. In either case we are left stand­ing in the cold while the train pulls out of the sta­tion. Of course there is always anoth­er train to take, but if our errors are habit­u­al, then it is clear we will nev­er get any­where.

How do we over­come these twin buga­boos, fear and sloth?

Of the two, sloth is the more per­sis­tent, but both will dimin­ish in the face of dis­ci­plined activ­i­ty. You know from your read­ing and from ear­li­er Lessons that we learn to iden­ti­fy pat­terns and take action in a mechan­i­cal fash­ion for exact­ly this rea­son: to elim­i­nate emo­tions from our trad­ing. So doing your per­son­al research, and then forc­ing your­self to act mechan­i­cal­ly on the basis of the pat­tern recog­ni­tion will sure­ly help. This is called dis­ci­pline, and fear can be elim­i­nat­ed through the appli­ca­tion of dis­ci­pline.

The elim­i­na­tion of sloth is a more trou­ble­some issue, often wrapped up in tan­gles of wound­ed self-worth and neg­a­tive think­ing. To elim­i­nate sloth, first iden­ti­fy it, and then sur­round it with pos­i­tive think­ing. You must resolve not to ignore the good things in life in favor of neg­a­tive pos­si­bil­i­ties. Sloth can­not tol­er­ate good spir­its, and will not live in an envi­ron­ment rich with pos­i­tive thoughts. Cre­ate this envi­ron­ment for your­self and sloth will melt away into the hid­den shad­ows of your per­son­al­i­ty, to reap­pear only on the dark­est and wettest of rainy days. If you are bur­dened by sloth, and wish to elim­i­nate it, start by doing good things for oth­ers, and their appre­ci­a­tion will lift you away from the grasp of sloth. The con­se­quence of note here: your trad­ing will improve by its absence.