It’s a common experience. You may feel discouraged or even personally attacked when it happens, right?
The good news is that there’s a solution, which I’ll get to shortly. But first, identifying the problem is key to finding the right fix.
Here’s what many traders miss:
Trading isn’t just about waiting for a setup or pattern to jump into the market—that’s the beginner’s approach.
Instead, picture yourself as a detective trying to solve a case. You gather clues and, like a puzzle, fit them together to form a working theory.
The same principle applies to trading. However, instead of solving a crime, you’re figuring out:
Who will influence price movement? Why will they act? Where will the price go next?
What do you notice about these questions? They focus on human behavior—and for good reason.
Take the Medallion Fund, for example, which holds the best track record in investment history. This fund, which relies on algorithmic models, was founded by Jim Simons. He once said:
“We don’t want to predict price; we want to predict when other market participants will act.”
Markets are always evolving—sectors, cycles, technology, and activities change constantly, which is why trading strategies can quickly become outdated. The only strategy that truly lasts is one based on human behavior because people don’t change.
Now, let’s talk about playbook trades.
Think about your daily commute to work. While you might take the same route each time, there are other routes you could follow, even if they take more or less time.
Price moves from one level to another in a similar way, often following different paths. Each signature trade represents one of the possible paths the price could take.
If the market starts aligning with your thesis, choose the signature trade that matches the current price movement. This gives you a clear map to guide your trading strategy. Does that make sense?
A quick note on human behavior:
Experts on human psychology can explain unconscious biases, brain chemistry, and how it affects decision-making. But ask them to identify all the ways this manifests in the markets, and you’ll likely hear silence.
The key is understanding that human behavior remains consistent, and this is what makes these principles timeless in trading.
