But, But But…which trade do I take?

As a trader, one of the most important skills you can develop is the ability to hold multiple conflicting views and selecting the right one at the right time.  While most other publications will show only one trade at a time, it leaves you at the mercy of them selecting the wrong trade with no idea what to do if the market does something unexpected.

A well-known trader calls this idea of holding multiple scenarios “strong opinions, weakly held”.

In other words, a trader remains flexible based on what the market is doing, not what they think it should be doing.

It is one reason why you will see us biased to the long side one day and then turn on a dime ready to execute short trades.  We are simply following the price action, trying not to get so stubbornly locked into any one idea that we miss a key signal that can cause us major harm.

Handling Multiple Trade Ideas – Example

In this situation you can potentially do the following:

Immediately execute the first trade idea shown above with 50% of your usual position size.  If the set-up in trade idea #2 occurs, then add the other 50%.  If the set up in trade idea #3 occurs, you will have already closed out your short positions so you can then initiate the long position specified.

Another alternative is to wait for the set-up in trade idea #2 to occur and execute a short trade. If the set-up in trade idea #3 occurs, you will have stopped out of your trade and be ready to execute the long trade.

I hope you see how this works.  Constructing alternative scenarios for every trade idea allows you to be flexible based on what the market is doing!

But What Happens If All Three Trades Are Losers?

Our general attitude is “so what?”  We’re paid to take risks – that’s our job. 3 to 5 consecutive losing trades is normal for a trader.  Sizing our positions appropriately so that we don’t panic when that happens is another core trading skill that must be developed and honed to perfection.