Better Trading Decisions

To make any good decision you need to take in any relevant information you have at the time, discard any noise, decide, and then commit.

Trading is no different, except somehow we screw it up…

1. Often we are confusing relevant information for noise.

We’ll read someone’s opinion, or start looking at unnecessary timeframes, perhaps we punch in other markets just to see what they are doing.

We have no simple decision-making process.

It varies all the time and we wonder why consistently is always out of grasp.

2. Other times we are seeking more and more data points to support our decision.

• I’ll just wait for confirmation
• Let me hold back until the RSI flips
• I shouldn’t take this under the MA

You know the kind of thing.

Sure, if these are part of your system then absolutely you should wait.

But if like the first point you start adding these ad-hoc then something needs to change.

3. Sometimes we make the decision and then flip-flop back and forth or don’t commit 100%.

This one stings the most…

You make a clear decision to trade, but at the last minute, you lose your bottle and trade half size or decide to ‘reduce the risk’ by tightening the stop.     

What’s the common theme here?

Let’s look at an analogy:

Pulling out at a busy junction.

• You’re stopped.
• You’re in gear.
• Your foot is resting on the throttle.
• And you’re watching for a gap.
• When you see a gap you accelerate hard to get into the space safely.
• Done – 9,999 times out of 10,000 it works.

Now imagine if you did that all over again but this time with a different method

• You’re stopped.
• And this time when you spot a gap, you need to get into gear, and get your foot on the throttle.
• You decide to check your mirrors again.
• Maybe a quick glance at the fuel and temp gauges (can’t be too careful.)
• Then you decide to go.
• But halfway across you change your mind and back off to 25% throttle…

What’s going to happen?!

I’m making a bit of an excessive point here, but you can see how the decision-making process in that situation would probably kill you.

Don’t get killed in the markets.

Have a clear and simple decision-making process. Then once you commit, DONE. No changing anything.

Try it for a while, then make adjustments to the process.

You can iterate and improve whilst still keeping it simple.