Why ask “Why?”

“What just happened?” So often traders ask this question when they observe a huge impulse move in the market. As we know, there are forces outside our realm of resources and information that move the markets, regardless of what we think or assume might happen. If you find yourself asking or getting hung up on this question, you need to ask yourself another question . . . “Why do I care?”

I have discussed the difference between Technical and Fundamental traders. Technical traders rely on technicals and there is a reason. Only technicals can be quantified and only technicals are observable. There is no way we can visualize any news or announcement until it is realized in price action. In other words, you can only trade what you see. You can only react to visual stimulus, so any time spent on speculating on the result of what someone will say or making a supposition about fundamentals is an effort in futility. You can never formulate a trading plan or create rules for a trading system based on fundamentals. You may have been taught about supply and demand, but the collective emotion at any given time in the market rules – game over.

Why something happened is irrelevant. We only care that it did and how it manifested itself in price. Why? Because our truth lies in visual stimulus and what we see in price is truth; and that is our only truth. It is amazing that we sometimes get sidetracked by our opinion about fundamentals and actually have to convince ourselves about what we see. We can only derive meaning from what we see on our charts, so how is it possible to make assumptions beforehand based on some fundamental supposition? We must base our actions on repeatable visual occurrences in our technicals because they simply do not occur in fundamental data – it is not quantifiable nor does it provide repeatable patterns to any measure that we can see, derive meaning and then act. These characteristics only exist in observable, technical data. If fundamentals could be quantified, we wouldn’t need charts. We always could trade our side of the fundamental argument – a totally variable and arbitrary approach.

If you accept fundamentals, you must now defend your side of your bias. You have now influenced your objectivity and thus engaged your emotions – which is suicidal when approaching the market. Track the information based on fundamentals and you will find that you can not abstract any consistency, logic or uniformity. Fundamentals are presumptions, conjecture and speculation. If you accept fundamentals you must also accept that you are interacting with the market variably – that is, you can not formulate a tradeable plan because there are no coherent, measurable metrics. This variable nature means we must ourselves be the constant. We can only interact with the market rationally and profitably based on logic and consistency – which fundamentals simply defy and only technicals provide.

So, all this to say that there is nothing relevant about fundamentals because we only take action on what we see; and what we see is price. We only need to be ready to act a signal based on the reaction of price and how it affects our indicators. I am always aware of news, not because I care about the data, but because I care about being prepared to act on the price action resulting from it. Any other assumptions or attempts to correlate data or other variables are just “forced intellect” and are also a waste of time. We may look at tendencies, but only with the understanding that they are unreliable when compared to observing price.

It is in our nature to try and draw some correlation or conclusion from our suppositions or opinions. Asking why something happened in the markets will always be the question that is asked too late for any course of action and therefore irrelevant. For our purposes, we can disregard fundamentals entirely.

“We only care about the collective emotion of traders and the footprints they leave as we observe their emotions in price. We can not draw any conclusions, find any measurable edge or make decisions with any logical methodology by asking why.” – George Lambro

We can however, become financially independent by being prepared for “What.”

What we see, what it means, and what we do.

That is our focus.

Rick

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