Trade Aptitude

Results of Friday’s Best S&P Futures Turning Points: Shorting the breakout from 5155.00 failed. 

No volume levels today due to contract rollover combined with an all-time high trading range. 

The World Index: (+100/-100) dips from +6 to -25 with Asia Bullish and the west modestly Bearish. 

Catalysts: Nothing obvious.  

Quick Tip: Confirmation

Many traders use a two-step process to enter their trades. The first is called a “setup.” Certain conditions appear ripe for an entry. The second step is called “confirmation.” The final evidence says pull the trigger. 

Here’s an example: Our trend strategy will signal that a trend is starting based on a chart pattern and current volatility. But that is not when the entry occurs. We wait for confirmation by looking for additional signals, then buy on a retracement to reduce risk and improve price. Simple enough. 

Last week a trade signaled and confirmed. It was worth 30 S&P points. I didn’t take it. I fell into a trap called Confirmation Bias. This is when you have a belief and rather than look at evidence objectively you focus on the evidence that supports your belief. 

Reviewing my trade journal later I found a prior entry about the same mistake! Once bitten, twice shy, lesson learned. 

Confirmation Bias holds you back. It’s rooted in your beliefs, which can be erroneous in many cases. Consider the person who believes they can’t “beat the market” even though countless traders do so every day. Their belief will get them exactly what they want. Nothing.

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Trade Fearlessly,

Mike Siewruk

P.S. Forward this blog to your trading buddies. Share in the wealth!