Unveiling the Hidden Dynamics of Trust in Trading for Strategic Advantage

May 10, 2023 Adam Fiske

You've got all these people:

And then you've got you. We'll get to you in a second.

But first - can you picture everyone plotted along the trading path?

You've got market makers, proprietary trading firms, hedge funds at your furthest point. Agree?

And overwhelming research says you've got the majority at the other end => had some success but it didn't last - still need to reach consistency - not making money. Correct?

Now imagine your position on the trading path sits between both groups mentioned.

It FEELS very different. Let me explain.

You see:
You know money flows from one end of the path to the other.
But did you know people give the bulk of that money voluntarily?

To illustrate:
There's a thriving tightrope walking community in the park where I walk my dog.

Ignoring the beginners' crew:
You've got two groups of people equally capable of walking a trapeze line they string up between two trees. But there's a stark difference...

Group A successfully walks a tightrope about waist-high off the ground.
While Group B successfully walks a tightrope about 2 Coke cans high.

But what happens when someone from group B tries to join group A?

Back to trading

Like our tightrope example, we'll ignore the beginners.

And it doesn't matter if you've been trading for 5 minutes or 5 years; you're a beginner if you need to learn the foundational role of relative value in shaping price movement.

So in the example below, when the only direction is up based on relative value, people going short are beginners. Make sense?

Now

Imagine you know about relative value. You know the price at some point will go up, and you click on the mouse and wham! You're long!

Does this mean you sit further along the path than people yet to reach consistency and profitability? Can you walk the waist-high tightrope or only the lowest one?

To answer

Imagine the instant you get long, the market trades a little lower. And then it hits you...

From this moment forward, it's only you. No one's holding your hand - no external guidance. What you've read, what you saw someone else do, what advice you got - right now all that counts for nothing.

You're riding every little move up and down. Right?

"Will it move up?"
"How long's this going to take?"
"Maybe I've got this all wrong?"
"What if it gets worse?"
"Should I try to get out at breakeven?"

Every person who's ever traded has experienced this because there's only room for one hand on the mouse when you engage in the market. But...

You know what's BS?

Taking heat - sitting through the nauseating discomfort of a trade that's gone against you and having to wait it out - anxiety and tension building with every passing moment, not knowing if it will return to the green or spiral into something worse.

But there's no badge of honour for allowing positions to take prolonged heat.

In the upcoming real-time trading you won't see enduring painful taking of heat. What's the trick? It's not a trick. It's training.

Listen

It's not enough to know which way the market will move. You need to know when to engage. That's what a playbook's for.
And guess what? There isn't a single playbook trade that takes enduring heat and discomfort.

Playbooks come under training. But there's also preparedness...

You see

I left out a group in the tightrope story.
Let's face it - walking a tightrope 2 Coke cans off the ground isn't really tightrope walking is it? And that's because there's no height involved. Right?

So once you've got the skills of walking a rope, you introduce height.

And so there's another group working towards walking a higher rope. This group still needs to trust themselves they can already walk a rope.

Meanwhile, the group who effortlessly walks the waist-high rope is internalising a high degree of trust through, you guessed it, repetition.

And here's where there's a vast opportunity available to anyone who wants to trade.

If you learn:

How price moves.
Playbook trades that don't take the heat but have edge.
And how to spot them...
Then you have a small universe of trades you can take over and over and build your trust in what you're doing. And guess what? Finally, tools outside proprietary firms with features to accelerate skill acquisition are available.

You can at best be who you are in practice – Agree?

Now ask yourself

Is every trader you're competing against trading with that level of trust?

No!

Their lack of trust makes them susceptible to emotional-fueled trading decisions, voluntarily giving their money to?

You! Provided you have the training and the preparedness.
Watch people voluntarily hand over their money to someone trained and prepared.

It’s a fact:

When you walk into a professional trading firm - you won't see chest-beating and high-fiving or similar carrying on.

There are no gallant displays of courage. In short, it's a very peaceful and calm environment. It doesn't take guts to trade when done correctly. There's no badge of honour for allowing positions to take prolonged heat because it's avoidable.