Thursday Trader's Tip: Thinking Probabilistically
Thursday Trader's Tip editions offer quick trading psychology advice that can be digested in 5 minutes.
Watch this edition video at the end of the post.
We’re creatures of certainty, black-and-white thinking, and objectivity.
Accepting the middle ground almost always comes with fear.
That’s fine; we must accept fear in our range of emotions. The problem is when this fear impairs trading performance.
Is it humanly possible to accept the uncertainty of the markets? If so, what does this truly mean?
The truth is that being comfortable with uncertainty is impossible.
Even when we’re entirely comfortable with a task that brings uncertainty, that’s not because we’re comfortable with it but because we deeply trust the processes we utilize to navigate it.
Think about the nervous public speaker. He worries about how the audience will react and what mistakes he can make.
However, with preparation, practice, and anxiety management techniques, the perspective of uncertainty changes.
It's not that they’re comfortable with it; their comfort comes from the processes they trust. In reality, they’ve learned to manage uncertainty, not eliminate it.
What does this tell you about market uncertainty and how you’ve dealt with it?
Have you been using processes to try to eliminate uncertainty?
Hesitate on entries in an attempt to avoid loss
Take profits earlier to ensure a win
Micromanage trades
Tinkering stops
Or have you been developing processes you trust to manage yourself during uncertainty?
Journaling
Analysing trades
Reflecting on performance
Double down on preparation the night before
Thinking in probabilities is tightly connected with managing uncertainty. It becomes impossible when there is no trust in the process.
Most of the time, you’re not afraid of the loss or missed trade but of your capacity to handle the emotions it triggers.
True self-confidence is the belief that no matter what, you're armed with the skills to self-manage. And that comes from the preparation of all possible scenarios.
A winning strategy combined with confidence to execute it empowers you to navigate uncertainty effectively. That’s the soil in which exceptional results arise.
Peaceful trading,
Sara
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