Doubt-the Rider of the Dragon of Failure

• Posted by annemarietrades
• on December 3rd, 2009

Okay, so not a confidence building poster, but it was funny to me.

Doubt is the bane of existence (a toxic poison with the ability to kill)…to the trader.

We know we cannot win everytime, so we must be capable of managing that punch to the face that the market gives us on occasion. I’m not saying be comfortable with being wrong, but learn to accept it as the price of admission.

But, oh how often in trading we doubt our own judgment…mostly, my guess is that we don’t want to be wrong; because everyone who does something wrong these days is openly ridiculed. Me, the card carrying glutton for punishment (probably why I continue to trade)…I put myself out there for the firing squad all the time; everyday. Leaving me with bullet holes as reward for my incorrect estimations.

For example,those of you who watched my latest webinar http://www.hamzeianalytics.com/Educational_Webinars.asp , you’ll all notice that I have been saying that based on symmetry, we should be entering a pullback stage. For the two days following this webinar, the market hit new higher levels outside the channel we are in, and on volume. Not really confidence building for yours truly, and in fact, this morning I was feeling a bit sheepish for seemingly being sooo wrong as we continued to show signs of breakout. But more than that, I began to doubt.

Doubt is a killer and here’s how it happened. First, I entered the trading day tired. Second, I began to notice how distinctly different my opinion was beginning to seem from others. Finally, I allowed the opinions of others to cloud my own judgment (which is based on my own system of trading rules)…and as the market blazed higher this morning, I even began to doubt my forecasting abilities.

It surprised me that I began to doubt so quickly (because I am horribly headstrong), but perhaps it occurred because I was tired and not as mentally sharp as I normally am in battle. Whatever the case, I began to doubt, and I began to question the validity of all my normal shorting triggers. Then, being completely drained from lack of sleep I left the market early…just before the selling party arrived.

Now I’m not sitting here saying see, I was right; right is a relative term with respect to time, and right now, I am still wrong.

[To be clear, my stance on the market is this...we are caught in a 1085ish to an 1112ish channel in the futures; our yellow box. The market seems to be in varying degrees of indecision with no one wanting to fully commit in either direction because we are all so used to it ripping up or cliff diving in front of us...so we're all caught in the 'day trading cycle': moving in and out and spending most of the time in cash after hours. However, for the time being, it is my estimation that when we break it will be to the downside...and so far the market is making me out to be rather wrong with all the bullish indicators popping us everywhere.]

What I am expounding on is why I doubted, why I let cognitive bias step in the way of my positioning, why I chose non-tangible data to influence my own trading timelines. I am certain that a lack of mental sharpness entering the day was a contributing factor.

The points of my diatribe are these. One, as traders we look at the market on different timeframes and different perspectives based on our style of trading. If someone says they have a bias to the upside, don’t swallow it automatically, simply ask what time frame are they considering. Then use that information to see if it openly conflicts with your estimations using CONCRETE data. Two, when we are tired, our minds become weak and more susceptible to suggestion. Couple that with the doubt that comes with being an independent retail trader out of the ‘know’. or doubt from inexperience, or doubt from past failure, and we have a recipe for disaster. If any of you remember my posting on ‘Considering the F word’ , know this the rider of the dragon of failure is self doubt.

Conquer doubt by carefully preparing for the trading day, being systematic, deliberate, and controlled in your actions. Be well rested, and alert.

Consistently work on replicating positive events so that doubt takes a back seat and stops stealing your money.

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