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How Trading Hesitation Works

Have you ever found yourself locating a trading set-up that meets all the rules and criteria of a strategy only to hesitate and then find yourself saying, “Ah! I would have been right!”. To take it a step further, have you then found yourself saying, “That figures! The trade I don’t take is a winner, the trade I do finally make and I lose!” What exactly is going on here? Why does this seem to oftentimes be the case? It can all be explained using some math and probabilities.

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Transcript:

Oh! I would've been right.Have you ever had that with trading?Where you would have been righthad you just taken the trade?That's really workin' against ya.Let's talk about how.I can only speak for myself,but I know I've had that many timeswhere you're seeing something that fits into a strategy,that fits into your rules,so of course, the underlying premise here is thatyou actually have a strategy that has rules.So assuming that, but those pieces in place,you see everything that meets the criteria,and you just hesitate.And then you find yourself saying,oh, I would have been right.And it would been a winning trade.Like I said, I've been there,so I'm assuming if you've traded for a while, you have, too.And I wanna show you kinda of just with somebasic math and probabilities and statistics,how the numbers are actually working against youin this situation.Now, of course it's gonna be differentfrom person to person, from strategy to strategy,but just to keep the overall premise of the pointthat I'm trying to make,let's just keep the math real easyand say that you know what, your strategy,that you've tested through either paper tradingor back--Or just, you know, however you've tested it,you've determined that, you know what,my strategy is right around a 50% win.You may be thinking, geez, Clay,that sounds like a really bad strategy.You know, if you can be right half the time, you know,and then assuming you have the proper trade management,then yeah, you can actually make money over the long haulbeing right only 50% of the time,again, with proper risk management, trade management,and all that good stuff.But that's not the point of this video.The point here is, you know, about hesitation.So like I said, 50%, we're just going with that.And the way the statistics work, probabilities work,is that every time you take a trade,it's basically a coin flip in the sensethat you have-- you can get either head or tails, right?50% chance.But once you say, alright,it's time to put this strategy into play,what's goin' on?Well, again, right from the get-go, you havea .5, so, half percent change,or 50% chance of being,you know, right in your premise.So you watch a trade, like I said, you watch,so we'll just do this.There's your eyeballs.You're watching.And then you hesitate.Meaning you don't take the trade.Well, what is that actually doing for your next trade?Because there you only had a 50% chanceto be right to begin with,and when you find out that you were actually right,and you didn't take the trade,well that still actually counts against your strategy,your set of rules as a whole.So now when you go on to, well,I gotta find another trade.Just realize that hesitation is costing you in the factof the way probabilities work,you no longer have a 50% chance of being right.'Cause now you are needing actually two wins in a row,and two wins in a row, what are you talking about?I didn't even get the win.That's the point.You hesitated, but this still would have been a win.So if you want your next actual real money tradeto be a win, it's actually not 50% any more, it's less.And the way the math works is,you now have to modify .5 by .5and that gives you--I'm gonna change out the color.Your probabilities of success now are actually.25, or 25%.So sure you haven't even made a trade with real money,but the next time you're actually seeking outaccording to your strategy, if it's 50% to begin with,you only have a 25% chance now of being right.And that's just, you know, the same as,well, what's the probability of getting headstwo times in a row?Well, 25%.So that's why when you hesitate,you're starting to put yourself behind the eight-ball.Let's say you hesitate again,and you know what, same thing.You hesitate,you watch, you see something.Actually we'll kinda put a sad face there.And all of a sudden, you know, you hesitate.We'll just go H.And what about another one?Now, sure, as far as, well,I didn't have any winning trades today.But you actually did have winning tradesas far as your strategy, what's concerned.You just didn't act on them.So if you're saying, well, alright, I hesitated again.Well, now realize that the odds of this next tradebeing in your favor, so again,as far as the math is concerned,you gotta multiply by .50, so when you multiply--What's half of 25 and a half?Now your next strategy is literally 12.5% chancethat you're gonna have a winning trade.And that's just the way odds, statistics work.So if you ever have wondered and found yourself goin',well, and I take the trade and lose?This is what's goin' on.Oh, if I would--figures, the time I don't take the trade, it wins.The time I do take the trade, it loses.(tapping on whiteboard)This is what's goin' on.Now, the goal here, obviously,is that the higher you can get your win percentage,then, yeah, I mean, if you do hesitate,you still have, you know, potentially maybe a 50% chancethat you'll be right the next time, or higher percentages.So that's why, at the core, sure, of course,you always wanna get your winning percentagefrom the get-go up as high as possible,because of this, the way that math works,it gets your worth-- works out in the real worldand can work against you if you start hesitating.But that's why if you have a true strategy,if you have true rules that you believe in,take the trade, don't hesitate.Because even if you don't actually take the trade,and then you see, oh, I would have been right,in the grand scheme of things,it's still gonna be working against youbecause now, you have a less likelihood of being right,because that's just a function of your strategy,that's just a function of the math in the first place.So again, idea here, definitely get your winning percentageup as high as possible,but at the core, get a strategy,get rules that you believe in, make that--And that could be a reason why maybe you are hesitating,'cause, wait, do I actually have a strategythat I believe in, or am I still kindajust gamblin' a little bit?That could be a problem,that could be a reason why you're hesitating.But just understand, this is not necessarily aboutthe why you're hesitating, this is the result of hesitating,and how probabilities and,you know, just the math is working.So keep this in mind, and yeah, if you believein your strategy and rules, don't hesitate.If you're out there trading alone currentlyand maybe are in the marketlooking for a community to join,to assist you in your trading, or to just help you,you know, give you another set of eyeballs,then I do have a private trading communitywhere you can trade alongside meand other experienced traders.So what you see poppin' up on the screen right nowis both an information link, so if you click onthe inner circle one, that is gonna take you to the pagewhere I explain all the details of what exactly comeswith the community, both the chatroom and the newsletter.And then the other image that has popped upis a behind-the-scenes tour, where you can seeexactly what is going to be contained within the community.I take you through, like I said,a behind-the-scenes tour of everything,and that way you'll know, precisely,what you're getting when you join.So definitely check that stuff out if you are interestedand thinking about wanting to join the community,and let me know if you have any questions.

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