I Don’t Have Confidence in My Trading Strategy

Of course you don’t. Nor should you.

Independent traders are missing strategy confidence. As a trading coach, I get a bird’s eye view of all the issues that traders face. I have reviewed over 2000 surveys and assessments, taught hundreds in our online courses and personally coached dozens of traders. The list of major issues is not as long as you might think. Always in the top three pain points of independent traders is lack of confidence in their trading strategy.

Strategy confidence is foundational. Imagine a house of cards where one of the bottom cards is labeled “trading strategy confidence”. Imagine pulling that card out of the house. You don’t need to be a fortune teller to know what happens next.

Many trading failures are symptoms of strategy clarity. If we don’t have confidence in our strategy everything else falls apart.

* We are afraid to pull the trigger on perfectly good setups.
* We get out of a profitable trade because we are afraid we might give back the profits.
* We cancel stops because we know the market is going to turn around.
* We introduce new indicators or tweak the strategy continually.
* We change asset classes.
* We try scaling in and out to satisfy the need to protect our profits.

Does a lack of strategy clarity or confidence prevent your trading success? If so, you are not alone! The lack of strategy confidence is a huge roadblock that prevents the independent trader from establishing a master trader’s mindset.

Too many variables. The typical trader will introduce so many variables into their trading execution is impossible to differentiate between the impact of the strategy and all the other variables that are moved in and out of the trading decisions.

“I want more confidence in my strategy and you are saying I should not have confidence?”

For most traders, there are many reasons NOT to have strategy confidence. Very few traders are aware of how to create, test and maintain a strategy in a way that will give them confidence in their execution.

First, reduce your market variables. To build a strategy you have confidence in, reduce strategy variables. Not only reduce the variables, but manage them into an organic order so that the market feedback can be attributed to the variables we control.

Next, reduce your emotional variables. Additionally, many of the independent traders’ decisions are driven emotionally by fear of loss, or dreams of big gains. This emotional state of the trader adds another huge variable in addition to all the other variables. They color our decision process so it is difficult to know what is a strategy issue and what is an emotional issue.

Most traders, even those that are eventually successful, start by being driven by the dream. It is like having a dream of being a pilot and being handed the keys to the Cessna. Imagine for a moment that you have not had any flying instructions and have a strong desire to be a pilot. You are committed to your goal. You dream about how that will improve your life. You see the status this will give you. You imagine impressing your friends as you fly them to lunch on the coast. Wow, what a wonderful fantasy!

Now, imagine being given the keys to the Cessna. Your family, friends and community are all watching your first flight. How would you feel? What emotions would be arising? What is the likelihood of a successful flight? Take a moment to fully get how you would feel as you looked at the unfamiliar instruments and the controls. An instructor leans in and shows you how to start the motor and move the controls, and waves goodbye.

How did you start as a trader? Be honest. What is similar? What is different?

Now imagine going through flight school that starts at the beginning. You are given the controls in an order that is organic and allows you to gain confidence one step at a time. The processes are repeated over and over, each adding a new skill.

Now, imagine your first solo flight after this training. What is the difference?

How confident are you in your own trading strategies? Evaluate your own confidence right now in your trading strategy and execution. How confident are you on a scale of 1-10? If you are less than 8 then it is time to make a change.

You have a choice – strategy conflict or strategy confidence. You can continue to build a house of cards or create a foundation for long term progress. Want to see what that choice looks like, sounds like and feels like?

Move to strategy confidence. If you are like most independent traders, you have doubts about your strategy and as a result have difficulty executing it consistently. Go here to read the Strategy Insights series by Rogerio Amado.

Trading Strategy Insights

About the Author Rich Friesen

A veteran broker and floor trader, Rich went from the "worst trainee trader ever", to building one of the most consistently profitable options trading firms on the Pacific Exchange by training his traders using neuroscience. Rich also holds a Masters Degree in Clinical Psychology, a B.A. in Philosophy, and is a graduate of the Gestalt Institute in San Francisco along with Master’s training in Neuro Linguistic Programming (NLP).

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