The headline of this post is a famous quote attributed to Wayne Gretsky, the famous hockey player that many consider to be the greatest hockey player of all time. They simply call him, "The Great One", and deservedly so. I understand that it was Wayne's father, Walter, that taught this principle to his famous son.
I have often thought that the same principle applies to trading. The truth is that no one really knows with certainty where the market is going, but over a period of several years, patterns become so familiar and they repeat with such frequency that traders can anticipate many of those patterns. Hence, I would extrapolate from Gretsky's quote that we should "trade where the market's going, not where it's been".
Often, traders will jump into a trade when they see momentum suddenly take off, and they frequently find that they have jumped in just in time to see the market reverse in the opposite direction. Then, they sit, wait and hope, with a prayer that the market will reverse again and bail them out. It rarely does. I've done this myself. It is called, "chasing the market". Never allow the market to control your success! Only allow the market to confirm your success!
This is why it is important for me, as a trader, to become sufficiently familiar with market patterns that I can anticipate where the market is going, not where it has been. I am often wrong. However, when I'm wrong, I am quick to correct myself and either reverse direction or at least exit a wrong trade. If the direction that I anticipated is wrong, I get out as quickly as my fingers can hit the mouse button. Small losses are a blessing!
