I'm convinced the most dangerous word in the trader's vocabulary is "should". Should can turn a winning day into a psychological loser, when a trader focuses on that move he or she should have traded. Should can make us miserable when we don't live up to our personal or financial expectations. Sometimes we focus so much on how we should trade or on how others tell us we should trade that we drift away from our own talents and interests.
But those sabotages are nothing compared to getting locked into views of how the market should be trading:
* The dollar is plunging, so we should get inflation and the market should drop!
* The market is in an uptrend, so we should rally today!
* We're in a growing deficit as a country; we're mired in Iraq; oil prices are skyrocketing, so we should have a bear market!
I can tell you this: I became a better trader when I started focusing on what the majority of stocks were doing rather than on what I thought the market should do.
On Monday, I thought we should get a higher market on Tuesday. When I saw that fewer stocks were making new highs in the morning even as the ES was moving to new price highs, however, I dropped the should and sold the open.
And, yes, I--like so many participants in the financial markets--lament the high debt, weak dollar, and rising commodity prices. But we have recovered from a steep decline, dollar flows into stocks are above average, and--as of Monday--well over 2000 stocks had made fresh 20-day highs. No matter how much I think the market should go down, it's not what the market data have been telling us.
"Should" puts my judgment ahead of the market's objective reality. And that's why it's the most dangerous word in the trader's vocabulary.