Today I want to share with you some insights about the gray zone.
The gray zone is something that I’ve covered in my book Mindsets of a Master Stock Trader!
All of these things that we’re covering in this post and book is all about the inner game in trading.
It’s about the inner concepts and the inner mindsets of becoming a master stock trader or more profitable.
A lot of the concepts will also help you out in the general world to see things from another perspective. It will help you to see a bigger perspective and to see things in a unique way.
In today’s topic, we’re going to take a look at the gray zone.
The Gray Zone in Trading
There’s a lot of grayness to trading. A lot of people like to look at things black and white.
And this is what I’m talking about. In trading, many people try to always go in for the lowest point as their buy point in a stock. And then the stock goes up, and then they try to catch the highest point as their sell point.
This is ideal. That’s the black and white zone. You buy low and sell high, and that’s ideal. That’s the perfect scenario. But unfortunately, trading doesn’t work out that way. It’s sporadic for someone to buy at the lowest point and sell at the highest point.
It doesn’t work out that way. A lot of times, you’ll be trading in the gray zone where you’re not buying at the lowest point. And you’re not selling at the highest point.
In our modern world, we live in a gray world. If you look at gun rights, there’s a lot of debate. Do we make them illegal, or do we keep them legal? It goes back and forth.
If you look at the pro-life versus choice, there is no debate about the gray zone. There’s are we on this side or that side. All these things are polarizing. That’s because there’s no happy medium. Politicians do this all the time.
In trading, this is where we find common ground. This is where you find profitability. But unfortunately, in most of the other areas that you see that you have become accustomed to, there is no gray zone. It’s all black and white. It’s one way or the other.
What I want you to start looking at in trading is that you start finding success in the gray zone. Many times people who are looking to get into some trades might try to wait for the perfect opportunity.
Waiting for the Perfect Opportunity in Trading
If you’re waiting for perfection, you’re waiting for the black and white zone. You’re waiting for that buy point.
The truth is you might wait for a very long time. And that’s just not necessarily going to suit you as a trader. The market is constantly moving. It’s constantly engaging. There’s always signals that are coming/ Information and data that are being thrown at you, and you’re not always going to have perfect entries and perfect exits.
What you need to understand is that the gray zone is perfectly okay. Sometimes even if a stock moves sideways, also if it’s not moving to the upside or even if it’s not moving to the downside, you can still make money from it.
The reason for that is that you still have some low and high points. If the stock is moving sideways, you could still sell things.
Like iron condors, calendars. You’re still making money from time decay and theta where you collect the premium. Just because a stock is not doing may be exactly what you expect it to, there’s still a lot of positives in the gray zone.
I want you to open up your mind and see things. Maybe it’s not a perfect trading opportunity. Perhaps it’s not the ideal stock. Maybe it’s not the stock that’s going to rip a thousand percent over the next year. But it doesn’t mean it can’t be a profitable trade. That’s the case, especially if you manage your money correctly and if you put on a trade that’s favorable to the movement of that stock. It can still work out, and it can still be a winner for you.
That’s the end of the game.
Here’s the big question: Are the trade that you’re putting on winning and working for you?
It’s not about perfect trades every single time. It’s about finding the right trade for the way that the stock is moving.
A lot of that has to deal with trading in the gray zone. 99% of the trades I do, I’m trading in the gray zone. I’m not hitting perfect buy points and excellent sell points. I’m not hitting even on order execution when you’re getting into the trade or exiting the trade – the bid-ask spread. I’m not hitting those perfect all the time.
Sometimes the market makers make a little more on me than at other times. That’s what I want you to be aware of as you start putting on trades.
If you’re waiting for perfection, you’re going to be waiting a long time. Start finding opportunities even in the gray zone because that’s where you’ll be trading most of the time.
I hope you see that there’s a lot of grayness in the world. And there’s a lot of gray parts to trading. It’s not going to be a perfect entry and exit; maybe once in your lifetime, you’ll hit it.
Most of the time, you’ll be trading in the gray zone. Get used to it, be familiar with it, and accept the trades that come your way.
Also, learn to manage them better, start involving and developing your blueprints, and adjusting and tweaking them.
Check out the book Mindsets of a Master Stock Trader!