THE CRITICAL LINK BETWEEN CONFIDENCE, AND TRADING EXECUTION

Turning Hesitation into Action

I reckon I've had zooms with ~20 traders over the past week, and by far the thing that stood out to me, vs when I catchup with more experienced guys, is the difference in confidence.

You would never hear a Full Time or Professional trader say 'Oh I sat out the volatility to protect my capital', or 'I was just waiting for things to settle down'...but that's what I've heard over and over in relation to the past few weeks price action. This really was a bit of a 'light bulb' moment for me, and will be a key part of my mission with TGM, going forward.

So the obvious question then is, how do we gain the confidence in trading to be able to execute the trades we want, with the position sizes that we should be trading?

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1) EXPERIENCE

Sorry, I can hear the groans and swearing now….but unfortunately there is no just no substitute for lived experience in my opinion. If you’re new to trading, at the very least get into a group, or find somewhere you can bounce off people who have experience or been there before.

I’ve traded through many cycles; Dot Com bubble (lost a lot of money), GFC (lost even more money), Covid (made ‘wildest dreams’ money), and even the last couple of weeks (made enough for another family holiday around the 🌎).

Although my trading these days is done purely off the statistical data, I still have a hell of a lot of ‘muscle memory’ of price action from these previous wild periods which I used alongside my Edge to have the confidence to 2x, 3x, 5x, 10x my usual position sizing recently when I felt the volatility entering the market.

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2) TRUST YOUR BROKER

CFD brokers are often put in the same bucket at Lawyers, Used Car Salesman, and NRL referees. They’re on the other side of your trade, so they have to be dodgy, right? If you find the right one, I don’t think so.

I would like to think that despite being a reasonably ‘Large / Premium’ CFD client, that I’m very low maintenance. 99.9% of the time I don’t need want any emails of phone calls, trading assistance, or to be hand held…that is, until I do. Then I want an answer, refund, or serious action, immediately.

This gives me confidence when I’m trading that if there are any issues (like we saw with many platforms going down a couple of weeks ago), or mistakes (I’ve been known to ‘Fat Finger’ a couple of trades in my time, trading 5000 contracts instead of 500😳. Hot tip - close the position and contact your broker immediately. They will not take kindly to delays to see if it goes in your direction) I need for this be sorted with a minimal amount of fuss. I’ve changed brokers a couple of times over the years, purely based on ‘trust’ fails like this.

I currently prefer Trade Nation and City Index.

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3) TRUST YOUR EDGE

This is obviously the big one. If you don’t trust your Edge, of course you’re not going to execute confidently. Even if you HAVE an edge, are you confident in your risk management during volatile periods? Where is your escape hatch? Additionally you should be 100% comfortable with getting stopped out at that level, and have no hesitation going again on the next trade with no baggage whatsoever.

At a guess I made 4 or 5, 100pts profit individual trades over the past couple of weeks. I don’t say this to gloat, but only to point out that each of these trades had ~10-25pts of Risk to me, on entry. The R/R of these trades was crystal clear from the data in terms of what has happened in the past, with similar volatility and setups.

Interestingly as I was reviewing my trades on SPX following the recent volatility, I realised that the biggest ‘Flex’ I made in terms of confidence in my edge, was having large open positions and resting orders overnight with no stop losses, all while I slept like a baby.

Now, I 100% do not recommend this approach. It’s extremely risky and is likely to result in a liquidated account. However for me, I was aware that if I placed stops they would most likely be hit, and I was also aware of the historical maximum downside if the trade went badly, and was subsequently comfortable with the Risk / Reward of the trade, given similar past price action.

Personally, I also recommend setting part Take Profit orders at regular intervals, based on likely minimum / average / maximum potential ranges. While I wouldn’t say this strategy increases my confidence trading, it definitely reduces the negative impact to my confidence, if I get stopped out on remaining positions.

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For me, I have a very defined Edge. I know what’s happened and how people have behaved in every situation imaginable in the past, giving me unbelievable confidence to trade when others sit on the sidelines. This is a complete 180 from how I felt trading for most of the past 20 years, which was basically trading based on fear and, greed of the potential impact on my P&L.

The result is that when I see opportunities in the market these days, there is no hesitation once I’ve mentally commited to the trade. Do many of these trades get stopped out? Absolutely. Heaps of them. But I have no buyers remorse, and take no part in revenge trading whatsoever (this is a serious trading hack, imo).

Wrapping up…..If you don’t have an identifiable Edge, please let me give you the best possible piece of advice I can, as well as saving you a lot of time and money….Just Stop Trading!

It’s a competitive, dog-eat-dog industry, and you’ll likely be swallowed and spat out. Take a break and spend that time following others and searching for your Trading Edge.

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Have I missed anything? Please feel free to reach out and add any thoughts.

Cheers

Marto

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