Sherry:
There are many phases similar to "the tape never lies", such as "don't argue with the tape", "don't argue with the market" and "No one is above the market", among others.
My interpretation of all of these phrases is that the market is going where it wants to go, regardless of where you want it to go. The goal, therefore, is not to argue with what the market should be doing, but to understand what the market is doing, and act appropriately.
Put another way, assume you are long a particular stock and holding it for an anticipated X% gain due to it's excellent fundamental and/or technical outlook. Unfortunately, the stock begins to drift lower shortly after your purchase. No need to fear, you reason, 'a mere correction'. After another week (or hour, depending on the time frame of your trading), the stock is down even more. There comes a time when you simply have to admit that your analysis has been wrong, or incorrectly timed. => "The tape never lies." The stock is headed lower for a reason. Get out before the loss becomes even larger.
-Eric |
