Unless one make mistakes, it is unlikely one can learn to prevent this from happening in future. Having sit on both side of the table, wearing the classic economic finance hat where I have to speak and communicate in the FINANCIAL ANALYSIS lingo and as a trader which only see the trend, this has been a struggle combating the 2 mindsets and personalities.
At times both are conflicting and at times both are in-line. Well, you guess it, the verdict and the judge is no other than the market that marks your positions!!!
As I have numerous occasion brought up and focus on this conflicting status, this are real and very challenging to try and find which direction or analysis to adopt when it comes to market.
Price is a product of 2 components namely the LINEAR and the NON-LINEAR factors.
I will define LINEAR as the Financial Economic Components and NON-LINEAR as the PSYCHOLOGICAL components.
The LINEAR components can be deemed to be MEDIAN and the NON-LINEAR as the VOLATILITY/EXTREMES around the MEDIAN.
Having said, it is highly unlikely a LINEAR personality will be able to understand the non-LINEAR paradigm unless one take the effort and initiatives to explore the other universe.
With the analogy of non-linear oscillating around the linear median, it means there will be time when the 2 personalities will agree before they separate and diverge. The linear will call the non-linear as undervalue or overvalue.
The LINEAR personality tends to portray the "giving orders attitude" that the price should be this or that. The non-LINEAR will be ignorant of the LINEAR, zoom up and down, does what it wants to do waving to standing LINEAR as it pass by to and fro.
Linear will be so preoccupied with all the formula and analysis while non-Linear will be just surfing along.
Once one can grasp this 2 personalities, one need to come to an understanding agreement that, one need to find a methodology to latch on the non-Linear and be productive.
The mix-up characters of non-Linear come due to some that preach and focus so much about projection and forecasting like fortune telling. Than we have another school who practice trend following.
This 2 attitudes can complement each other if one knows how to manage. One can do the forecasting between NOW and THEN. What happen between now and then is actions and trends. The projection can be right or wrong only market will decide for finale. Just like market will decide the outcome. Not LINEAR and NOT non-Linear.
The conflict between LINEAR and non-LINEAR is all about EGO. Well market will say, fine, I am going my way..
Like all objects in motion, one can develop tools to track the motion activities. Sometime there is acceleration, steady state (no deceleration or no acceleration) and sometime there is deceleration. Until the price change direction, the trend will undergo all this 3 forms or velocity state before it finally concede to end the existing direction superseded by a new direction.
While one is bias to have only UP and DOWN direction, one must not IGNORE SIDE WAY as a DIRECTION. SIDE WAY IS ALSO A DIRECTION!!!
Remember we are dealing with a dynamic living creature which is NON-Linear most of the time. It is not easy to accept that one has to completely obey the market no matter how irrational or drunk market action seems to be. Until we release this knowledge ego and humbly listen/obey the market, it will be an uphill battle until we get our mind to understand what market is all about.
OBEY OBEY OBEY
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