Trade with conviction, but the right sort

In trading, the mantra etched into the back of our minds is, ‘keep it simple, less is more’. Always pare it right back, emotionally and technically. Don’t get bogged down in predictions and over analysis; just execute a proven strategy when the signals tell you to. There are plenty of voices out there espousing forecasts. We traders must block our ears to the clamouring that can pull us in multiple directions and focus on the business of identifying only the best set-ups, then execute them and let the market do the rest.

So we trade with conviction, with belief in the validity of our strategy, but that is all. We don’t extrapolate this to conviction about the outcome of our trade. Our conviction is focused, not far reaching. It is about the strategy and set up, not about the outcome. If our conviction in a trade extended to its outcome then we could quite possibly find ourselves on a nasty losing position, hanging on with firm conviction that it would come good in the end. Many have come unstuck with that approach. It is conviction in your strategy that tells you when (and how) to get out, as well as when to stay in. It has nothing to do with conviction in the outcome. 

Of course news can dramatically affect the market, but no matter how great a storm is whipped up a focused conviction in our strategy will mean that we can ride it, taking advantage of set-ups and opportunities to ride a wave. Conviction that the market is about to spiral or charge through the roof is not in itself a valid reason to jump on a trend or reversal. Yes, we trade the news, but we play the reaction. 

Trading is often touted as a means of making a quick buck. Many have come unstuck trying to do just that. This is not to say that it is particularly difficult, it just depends where your conviction lies.