Failure of a signal - Impact

Some times a signal, that you have been using fails. Does it mean that the trend is changing?

There are times when on a failure, there is an immediate feeling that one must ride the market the other way. It also happens due to the mental need to compensate for the loss incurred on the signal failure.

Though occasionally  the market may indeed go the other way, it is always better to re-look at the market on the signal failure.  Forget the loss incurred and think of the decision as if it is a new transaction that you were to decide on.

This is essential as many times the failure is only an advance warning of a trend change and it may be quite some time before the change does occur.

So a signal failure can be taken as an advance warning and one may reduce the size of positions till a final confirmation is in place.

As Ayn Rand said some where - negation of a negative is not necessarily  a  '+'.