The 'in spite of' reversal trade: Why it increases your trading confidence

Keep reading to discover why it instils supreme confidence.

For context: 

By keeping you present, multiple points of evidence silence the voice of doubt, ensuring it doesn't interfere with your trading.

But it's the way in which you stay present that positions you two to three steps ahead of the crowd, ensuring you: 

• Don't miss moves.

• Avoid giving back profits.

• Enter with surgical precision to limit harm to a paper cut. 

However, achieving this requires all the stars to align. Agree? This is equivalent to accumulating multiple points of evidence.

As evidence accumulates, so do the odds of making winning trades.

Example: On Wednesday the 13th of this month, evidence for a short trade was as follows:

With our sequence of 11 points of evidence, awaiting the final piece feels like a 'fait accompli'.

But instead of preempting our process: 

We wait for our final piece of evidence which requires an existing segment of aggressive sellers to move onside. Then something unexpected occurs...

Despite all the preceding evidence, the segment of aggressive sellers remains offside.  It's such a rare occurrence I can count the times I've seen it on one hand.

What happens next?

Despite all the evidence indicating a high-probability short trade, we now find ourselves executing the Once Bitten Twice Shy playbook trade on the long side.

What's the meaning behind once bitten twice shy?

The aggressive sellers found themselves in a deeply losing trade. During this period, they experienced moving deep into the red and the associated emotional discomfort beyond what they anticipated.

As the pain subsides (almost returning to a profitable position) relief washes over them.

But when they witness the price reversing against them for a second time—their emotional distress reignites—intensifying with each upward tick.

Coupled with the fresh memory of past losses they hit the 'eject button' on the trade to avoid further financial loss and emotional pain.

Back to the short trade evidence:

When markets defy such odds they often mark significant turning points.

Traders who recognise these opportunities act with conviction—increasing their position size.

Increased position size means greater payouts—essential for meaningful trading results.

Also known as outlier returns they're essential to winning the trading game.

In the trading above, notice the immediate add to increase the size of the trade. This is a rare opportunity where as a trader you need to press (aka increase your exposure).

And notice both above and below the strategic profit taking along the way while also continuing to increase the position using the recently banked profits.

Remember

Without multiple points of evidence, we wouldn't distinguish this trade opportunity from any other.

Key takeaways

Imagine yourself at your trading desk, observing multiple points of evidence, knowing the more connections you make, the greater your confidence grows.

This approach keeps you deeply engaged in the trading process, leaving no room for self-sabotaging thoughts to undermine your decisions. Make sense?

Now, imagine consistently executing similar trades daily for months.

Do you have any guesses as to why you're always strides ahead of the crowd?

Consider this:

Navigating the market can be overwhelming for many people, making trading a nerve-wracking experience. Perhaps you've felt this way, too?

Constant discomfort, wavering confidence, and inconsistent results can weigh heavily on one's mental well-being.

These challenges often cloud your judgment, hindering your ability to spot genuine opportunities and avoid pitfalls. Sound familiar?

On the flip side:

The trading scenario described above holds true for every trade when you employ multiple points of evidence and playbook trades, reinforcing your confidence and competence.

Unlike the majority, you gain clarity on when to engage with the market and when to step back, regardless of surface-level allure.

Tell me:

How many times have you heard "Learn to take your losses"?

Probably countless times. But is it helpful? Tell you in a second.

Taking losses without knowing the real odds of the trade working and without having supreme confidence doesn't fix your trading results. Maybe it's said with good intentions, but in reality, it's unhelpful advice.

Why is that?

The fundamental principle behind multiple points of evidence is safety first. If you've practiced this method repeatedly starting with simulation, then tiny losses are easy to accept.

Trading in simulation to gain experience and prove you can make trades which, at worst, are a papercut builds your confidence.

You can then transition to employing the same strategy in real-life trading.

This is the process I went through at a professional trading firm, so it's certainly the best approach for working with clients, as confidence plays a crucial role.

In closing

Now you know why multiple points of evidence are so much more than 'finding good trades'. They take a safety-first approach by showing you when not to trade and how to limit trades that don't work to papercuts. Moreover, they empower you to combat self-sabotage and bolster your self-confidence. 

If you're ready to transform your trading by implementing multiple points of evidence, reach out to someone with an extensive understanding of the subject who's experienced in transferring these skills.