Failure of a signal - Impact

[Shantanu]

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 '+'.