Years ago when I was in college on a golf scholarship, I read the book Golf is Not a Game of Perfect by Dr. Bob Rotella. I had heard a number of Tour players refer to him as their sports psychologist, and his previous book had gone out of print, so I was eager to devour this book when it came out.
Replace the word ‘golf’ with ‘trading’ and you will find a ton of useful concepts in it.
One of the ideas he introduced (which I also covered in my Trading and Golf series) was that one should have a “conservative strategy and a cocky swing.” By that, he means don’t take unnecessary risks with your style of play that can lead to big blowups. Choose to take the percentage shot and then execute that shot with confidence.
Every trader must also do this. Pulling the proverbial trigger on a trade requires a certain level of confidence to begin with. Once that has been done, the next goal is to stay in that position while the trade runs its course. This second step requires conviction.
Conviction in Your Strategy
It can be a fine line to walk between confidence and cockiness, or between conviction and stupidity, so it must be done with care.
As traders, it’s imperative that we continue to set aside our motives and ensure that the price action takes precedence in our decision-making.
Erring too much on the side of caution leaves us sidelined indefinitely, unwilling to venture out into the market waters where both opportunity and danger reside. Likewise, erring too much on the side of conviction can end in disaster when we decide the market must be wrong to disagree with our assumptions and opt to stay in a losing position despite opposing price momentum.
In my experience as a trader, here is what conviction in a strategy looks like:
There’s a strong belief in the overall method, paired with an understanding that a safety net must be in place. There’s acknowledgement that conditions need to be suitable for the strategy in order to give it the best chance at working.
Amend Your Method
There’s nothing wrong with having a strong belief in your overall trading method, and I’d argue that that can be among the best traits a trader can have.
It’s important, though, to work hard regularly to identify and plug any holes in your method so that when it’s off, it doesn’t cause irreparable damage. Objectively review your trades in search of outstanding flaws or common themes among those which worked or failed.
Granted, it’s an ongoing balancing act to continually seek out ways to improve while still trusting in your method. This part isn’t easy, so it’s somewhat of an art. The key is to stick with what works until evidence surfaces which warrants an amendment to your method.
One last note. Anytime you miss an opportunity but followed your strategy, don’t beat yourself up over it. This will happen! But stay alert for the next trade instead of constantly hawking the one that got away.
What keeps you on track in your trading? Leave a comment below if you have something to add.
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