Projection

Psychological projection or projection bias is a psychological defense mechanism where a person subconsciously denies his or her own attributes, thoughts, and emotions, which are then ascribed to the outside world, usually to other people. Thus, projection involves imagining or projecting the belief that others originate those feelings.^[1]

From Wikipedia.

Although it doesn't quite match the definition above, my idea is that in trading terms it's the assumption that the market is going to do what you think it should, what your analysis suggests is the most likely outcome. If you're using Elliott wave analysis, which I do in a loose way, then you are literally projecting an outcome. The trick is to treat that outcome as a hypothesis and be prepared to challenge it. It seems to me that treating the possible outcome that you've plonked your money on as just that, a possible outcome, is quite difficult. Human nature will tend to make you blind to evidence to the contrary.

For example, about half an hour ago I thought, there's no way the market is going to break major chart support today and I bought a couple of things which I've scrambled out of again because the market did just make a new low, albeit by a point. The market is recovering and it was a reasonable hypothesis, but I didn't wait for any signals on, say, a 10 minute chart.

Overall, the US indices are surprisingly robust despite setting up in a head and shoulders pattern like the German and UK markets. The Aussie market is unconvinced and with US overnight futures down, the index is fairly weak. It suits me overall and I've just played around with my positions. Selling another 25 July 4300 puts in BHP at 93 as the stock has slipped further but time decay is starting to eat away rapidly at the premium. I bought back the CGF short at 472 with the idea of reshorting on a rally while OSH is surprisingly strong. I bought some early at 654 and have sold out again at 667.

12.28 One stock that has been behaving itself today is PDN. So far I've been able to stick to my plan which is to give the stock the chance to fall to a new low unless evidence suggests otherwise. There have been 3 days of mild consolidation and that may now be over.

2.20 The index has been oscillating around breakeven with a mild skew to the downside. At present, the Asx 200 is at 4471, a loss of nearly 3 points. It's a reasonable response given that we overshot on the downside last week but the overnight futures are weak as are most index charts.

I have a new overnight long in QAN where I bought a few at 184.5 early in the day. I almost immediately regretted the buy but the stock has not, at least, reversed hard. My logic is that listed travel agency, Flight Centre, has just upgraded and is performing well. One of the few strong parts of the economy is overseas travel as Aussies are rushing to take advantage of the strong local currency after years when it seemed chronically undervalued. QAN has been fighting all sorts of operational headwinds but it's back at support and underlying demand is going to be there for as long as the currency is strong.

My initial premise was that the stock had bounced off a higher low last Thursday and traded above that peak this morning. My stop was close also. However, that's all very well but the first rally didn't break previous lows acting as resistance and there was no follow through buying this morning so I now think that it's probably going to drop to a new low first. I'm in two minds as to whether I should wait for my stop at 179 or just bail at around 182, 182.5. I bought 20k where I might have bought 40k if I was really confident so it wouldn't be too much of a wrench to take the hit.

4.13 The market looked ready to rally for most of the afternoon but couldn't manage to close in the black. The Asx 200 chart could plausibly rally hard; there's a fractional new low with no follow through at major support after a week of heavy selling. Nevertheless, there has not even been a break of the previous day's low so it would be a big call to reverse my book.

I also sold my QAN at 182.5, will try again when I'm clearer.