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.
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