A common problem in the markets is trading with hindsight. For example, you make a trade, book a profit, and then watch the move continue — realizing you left money on the table by not being more patient. Other times you wait for that nice run that never materializes.
Trading with hindsight can introduce psychological issues when managing a trade. You might think you can judge by the current conditions whether a big move is at hand or not. But if you second-guess yourself for getting out too early or too late, you’ll have problems taking the next trade.The best way to avoid this is to perform a thorough analysis of market behavior and get some hard numbers on which to base your trades.
You will know what typical market behavior is and can develop strategies around that knowledge. In addition, performing this type of market analysis on a regular basis will alert you to changes in market volatility.
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