Profitable ETF trading strategies: cooperating with the voice of the future
Trading is by its very nature a crapshoot, filled with uncertainty.
People find trading so difficult because it rewards the ability to maintain an open mind with respect to performance and uncertainty, whereas our pattern matching brain desires to create order out of chaos no matter what the cost.
We like to believe that there is order in the universe and that things can be known. Based on this belief we seek to improve our pattern matching capabilities in order to better understand the world around us.
This leads us to believe that our performance is attributable to our own skills as the primary cause of our results.
Trading can be frustrating for people seeking certainty and deep explanations that are robust and reliable, precisely because it is a complex adaptive system that seems to have an irreducible complexity that resists complete explanation.
Even very reliable systems go through periods of time when they underperform random entries. This is because no single system can be as complex as the market in the act of simplification creates conditions in which the system will under perform. Humans being what we are, we interpret these periods of underperformance as the system being broken or ourselves to blame when all that is happening is that the market conditions no longer favor a particular rule set.
It is a normal response after a losing streak of some length, to doubt yourself and begin to anticipate that every decision you make will lead to failure.
It’s normal to start hearing a judgmental voice in your head that tells you in the moment of decision just how wrong are going to be in the future. The voice reminds you that it will be there then in order to say “I told you so”.
Typical human bias will cause us to remember only those times when the voice is right and not all the times when the voice was wrong and we will begin to reinforce our emotion-based belief in ourselves in a harmful way.
I call this voice, the voice of the future.
I recommend that you listen carefully to that voice and find out the name of the character who is doing the talking.
Conduct some deep reflection and inner theater to find out the source of this character and the emotional events in your past that give rise to this judgment of character.
This character can be very helpful to you in many life circumstances.
It may not be necessarily helpful however when you’re trying to trade the markets under conditions of uncertainty.
Psychological work can help you reconcile yourself with that voice in the function it performs and help you come to an agreement on how this naysayer can actually be helpful to you.
For instance, if you set this naysayer onto observing you following your rules and alerting you to those times when you take shortcuts, this critical observer can be immensely powerful.
When it crosses the boundaries into judging you for being wrong than it has overstepped its boundaries and is no longer being helpful.
Understanding and appreciating this deep part of yourself can have a powerful impact on your trading at times when it gets difficult.