Rational expectations is a hypothesis in economics which states that agents' predictions of the future value of economically relevant variables are not systematically wrong in that all errors are random
That is, it assumes that people do not make systematic errors when predicting the future, and deviations from perfect foresight are only random.
(pulled from wikipedia )
basically, no matter what you will never accomplish the perfect trade with absolute zero drawdown. Yes we can time the market correctly sometimes and feel that we have made a perfect trade, but in reality you can not have the perfect trade in a random market. That's why every time we trade it might feel like we have made a mistake, or made mistakes in our executions even in our winners. The real mistakes that we can learn from are the ones where our future price predictions were wrong... not the execution side, but the fundamental reason for why you think the future price will end up in that direction, also the mistakes that we make while managing the stop loss and t/p... I think we have to separate the mistakes into 2 categorys- was it a mistake in the trade direction or t/p s/l, which we can learn from and correct? or was it what appeared to be a mistake on our part but reality it was just a result from market randomness.. something that we can not correct...
That is, it assumes that people do not make systematic errors when predicting the future, and deviations from perfect foresight are only random.
(pulled from wikipedia )
basically, no matter what you will never accomplish the perfect trade with absolute zero drawdown. Yes we can time the market correctly sometimes and feel that we have made a perfect trade, but in reality you can not have the perfect trade in a random market. That's why every time we trade it might feel like we have made a mistake, or made mistakes in our executions even in our winners. The real mistakes that we can learn from are the ones where our future price predictions were wrong... not the execution side, but the fundamental reason for why you think the future price will end up in that direction, also the mistakes that we make while managing the stop loss and t/p... I think we have to separate the mistakes into 2 categorys- was it a mistake in the trade direction or t/p s/l, which we can learn from and correct? or was it what appeared to be a mistake on our part but reality it was just a result from market randomness.. something that we can not correct...