A funny fact of trading is that you can choose two different traders and give them the exact same chart and also the same trading pattern, You will be surprised to get very different results. All the things being equal such as knowledge, experience and access to information, then why do 2 different traders behave differently when they see the same chart?
Actually, there are lots of reasons behind reaching different conclusions. This article will spotlight few important factors that lead to several perspectives that can exist on the market at the same time: yours and those of your opponents (those who are on the other side of your position). With the help of thinking about these different perspectives and why they may exist, you can become a better trader.
1. Opposite trade or no trade position:
Traders have strong opinion of the chart if they are directly involved in the trade. Suppose a trader takes long position in EUR/USD and the other takes short position of the same quote, then each of them are probably going to defend their position.
Likewise a trader’s opinion about the chart will be different if he does not take the trade.
Simple fact to understand is when you are demo-trading with virtual money; you are probably going to get good profits than when you trade live. It is because the money is virtual not real. The key to trading success truly is trying to forget about the money and trading the markets as if it’s all a game and the money is just a way of keeping score, a tally of points, so to speak.
Once you take a trade, it is like wearing colored glasses, It is going to influence your opinion regardless of trade being good or bad.
2. Following different Trading Strategy
Difference opinion about a chart could arise from something as simple as having different trading strategies.
Suppose Trader A may see a chart going up, but he does not want to go along with the trend as he follows countertrend, he wants to short into the strength. He hates trading with the herd this he goes short.
Whereas on the other hand, Trader B may see that same chart going up and he is looking to go long! He can’t ever seem to go against the herd thus he goes long.
We cannot judge whether either of this approach is right or wrong. However, it is more dangerous to trade against near-term trends, Few traders just have a knack at fading the market, or picking the places the market will reverse (contrarians). But for most traders, following the trend make the best bets.
3. Timeframe
When traders who trade in different timeframe share their opinion of chart, it is pretty sure to have different perspective. If a trader is long swing trading position on the daily chart AUDUSD and he is talking with day trader. As they both discuss, day trader might have reasons why the AUDUSD will fall which make the swing trader to make second guess about the trade, or even alter it.
But the day trader could have been talking about what he thinks will happen in the next 24 hours, while the swing trader would take a couple of weeks to develop.
4. Recency bias
Two traders who are trading on the same chart may see the charts differently due to the reason called “recency bias”. Recency bias which means that you have a bias, opinion, or feeling about something due to an experience you recently had with the same thing or with something similar.
Suppose trader A might have faced the same scenario in which he might have made good profit whereas trader B may have might have lost money under similar market conditions.
Being humans, we are all influenced by recent events more strongly than past ones, its just a part of being human. This can be prove to be good and bad in trading. Market conditions that are trending strongly lend to recency bias being beneficial as you will make profit if if you keep getting in the trend on pullbacks. Whereas on the other hand, when the trend changes and the market starts moving sideways, you will lose your money and end up with a loss.
5. Varying trading skill level
Skill level will influence on how two traders will look at a chart. A more experienced trader might find price action a silly thing to follow and that a newbie might not be able to identify yet.
Normally, Newbies tend to jump from system to system a lot and get really excited about the last news that they just read. Thus if you plan to discuss with someone about a chart , make sure that they have some experience behind their statements.
6. Attached to the market Vs one’s initial vision
People can become emotionally attached to charts or simply their initial view of a chart for a variety of reasons.
Imagine a trader who has done extensive research on a market and studied a chart a lot thus he will likely get attached to a specific viewpoint. He will be with a view that the time he has spent studying the market must have value and he can’t accept to think that the market is not doing what he expects. This will in turn make him to watch the latest news and articles that support his perspective of the chart (after all, you can find any opinion on anything online). It’s basically about letting arrogance and one’s ego dictate one’s behavior. A trader can get attached to a chart just due to the reason that he does not wish to believe that he is wrong or that all of your research was done for nothing.
Whereas on the other hand, other trader who may not have this mental barrier (because he didn’t do any research) probably has an advantage over the above trader. When a trader spend less time on something, He will be more neutral and less committed. This gives you a new perspective and, above all, a more objective one. Being objectivite is beneficial in trading.
7. Technical indicators vs. “clean” charts
One other main reason on why 2 traders see the same chart differently is indicators. Some traders love to fill their charts with technical analysis indicators that make their charts look like works of modern abstract art.
Whereas Another trader who make use of simple, basic price action charts, without indicators, will inevitably have a different perspective on the same market.
Final words :
The above listed are some of the common reasons why two trades see a same chart very differently. Obviously, there’s no right and wrong when looking at a chart. Every trader has their own trading methods, experiences and biases that tell what a good trade looks like.
If you find someone in a bad trade or wish to alter your trading, depending on the opinion of others, be sure to remember the above reasons. They are perfectly good reasons why your opinion is just as valid as the opinion of another trader.
Follow your own trading plan and let your edge work for you.
Happy trading !!!
