Doubt Creeping In (23/06/21)
- What is doubt and what are the causes of it?
- How does doubt effect your trading?
- Psychology of missing out on huge returns from the forex market
- Read of the week
- Dealing with doubt from family and friends + the solutions to your doubts
Part 1: What Is Doubt?
"a feeling of uncertainty or lack of conviction." – Oxford dictionary definition
I'm sure you can recall some times in your life where doubt has taken over.
I'd argue doubt is the actualisation of fear. Fear is a projection of some expectation into some future moment, an anticipation of something you expect to take on a negative characteristic or harm you in one way or another.
Doubt stems from a similar mechanism but doubt is actually believing your fears on a functional level.
In my opinion it is one of the most dangerous flaws of any business venture or path in life for that matter, it is especially prominent as a trader and has been a road block for the majority of people at least at some point throughout their lives.
Doubt is illusive and subtle but it can have some disastrous effects in the long run. It's the opposing force of confidence and it can take many different forms, especially as a trader. You can doubt: the market, the trend, the pattern, the set up, the management, the list is endless…
It can effortlessly turn a profitable trader into a consistent loser but the flip side of the coin is also true, mastering your fears and doubts can just as effortlessly turn a consistent loser into a profitable trader.
Part 2: So How Hoes Doubt Affect Your Trading?
Mark Douglas believed that ALL of the problems you will or have come across in the market will be because of fear or doubt. I believe the same. So quite simply, if you aren't yet a consistently profitable trader, you have yet to master your fears of the market.
Don't let the negative tone of this introduction get you down, doubt will not stump your progress as a trader if you don't let it.
This article intends to educate you and provide you with the tools necessary to identify this as a possible cause of your inconsistency as a trader. After all, as Sun Tzu stated in the art of war "If you know the enemy and know yourself, you need not fear the result of a hundred battles."
"You are your only obstacle"
My aim with this piece is to help you better understand your doubt (the enemy) so that you can realise your potential as a forex trader.
Part 3: What Are The Causes Of Doubt?
A lack of clarity:
Some would argue, a lack of experience or confidence is its root cause and I agree to an extent. I believe it is down to simply a lack of clarity.
Experience brings clarity and confidence comes hand in hand with it, if you have experience and know what you're doing, you're confident. If you aren't sure on what you're doing, you will likely lack confidence and doubt what you are doing.
So if you doubt your strategy or second guess your decisions in the markets, it's as a result of a lack of clarity.
There are numerous different trading strategies out there, a large majority of them have the ability to technically turn a profit. If a strategy is proven to be profitable and someone learns it and can't be profitable with it, the strategy isn't flawed, the trader is or more likely the traders mind is.
A trader with the correct psychological skill set could pick up any technical strategy (given time to learn it of course): indicator based, price action based, structure based – and still be consistently profitable.
I'd describe psychology like computer code, you're born a blank canvas with only your natural instincts written in; as you grow up, learn and gain life experience your thoughts and your external environment begins to write your code.
Sometimes you can have flawed code written in which causes you to perform flawed actions, for example: entering too early or too late, deviating away from your strategy, cutting your winners too early, letting your losers run etc.
This all results from this badly written code, changing it is not that difficult however finding it is. I will thoroughly explain the implications of your subconscious code in another edition for now let's stay on track with doubt.
I can almost certainly tell you, if you have yet to find consistency in the markets that fear and doubt are your flaws and that clarity is your solution. The fine details of your doubts will be unique to you and everyone will require their own methods to solve their problems. I am going to take a shot gun approach and attempt to cover it later on, with the hopes of providing some help to you guys at TST!
We covered the DXY and USDCAD in our PRO Telegram. In the first image we explained how the DXY still had potential to drive lower into this strong bullish order block, both EURUSD and USDCAD were in previously highlighted areas of interests, seeing a reaction during this.
This trade went on to bank +2.5% however continued running in our direction hitting all of our longer term targets. Position would currently be running +30.13% at the time of writing.
This would frustrate a lot of traders, getting taken out early before price rocketing in your direction. We understand the market can do as it wants and we have no control over the movement of price, getting emotional over this will not change the outcome, we simply have to accept it for what it is and learn all we can from it before moving onto the next opportunity.
We did well to remain patient, it would have been easy to see USDCAD showing signs of reversal just above and panic by getting in early. So we utilised patience here to wait for price to come to us.
Another point to highlight is that we did well to not dive into both USDCAD and EURUSD, it's easy to think about how much % you can make diving into two positions looking at the R:R however we only focus on minimising our risk and protection of our capital is our main objective in the markets so risking a total of 2% on two very closely correlated pairs would go against this.
A relatively short book diving deep into some good perspectives of life. It teaches you a great way to achieve happiness and helps you gain perspective of what's truly important in your life. A lot of the information in the book can vastly help improve self confidence simply as a result of shifting your paradigm of many aspects of life such as suffering, death, failure and choices.
Part 4: Managing External Doubt
Dealing with doubt from family and friends is a different kind of battle.
Their doubts can easily translate into you doubting yourself; you must have a solid foundation and great courage to fight for what you want despite other peoples opinions.
It is a tough topic to delve into but I must start with highlighting the fact that external doubt is just that, external. It's outside of your inner environment and will not effect you if you don't let it. It is only a danger when it causes you to doubt yourself.
Their opinions are out of your control. Criticism given in a constructive manner is always helpful. However, people who are capable of doing that successfully are rare, especially if they are close to you.
You know yourself the best and no one can take that away from you. Once you have true clarity on what you want then nothing will be able to knock you down, make sure you're sure yourself.
If you aren't confident in your own venture how can you expect others to be confident in it? Start by building a strong integrity and belief in yourself by finding clarity on why you're doing what you're doing.
My second point is to educate and not convince. Your friends and family may not support your trading simply because they just don't understand it.
From my experience of explaining it to my friends/family, most of them get the initial impression it is just gambling and that it's all down to chance, others think you can't make a consistent living from it and don't understand how you even create profits. Start by teaching them what forex trading is, explain to them why YOU want to do it, explain how CFD's work, educate them on everything.
Show them your plan moving forward, be passionate and show your confidence in it, a lack of self confidence will be obvious to them and that will only cause them to doubt you even more.
I like to start by explaining that the journey to becoming a professional trader is no different to any other skilled career. To become an engineer, doctor or architect you must first spend years and years studying and learning the skills before you can make any money, why is forex trading any different?
It is one of the hardest skills in the world to master, you must spend the time to learn the skills before you can start making consistent money. A lot of people assume it's 'easy money' and don't look at it this way. Simply aim to shift their paradigm of what trading is and how it is no different to becoming say an architect, as this helps them understand the concept and therefore they can support you better. It is a professional career like any other, you must also treat it this way.
Your friends and family should support you no matter what. More often than not they will want the best for you and what ever actions they take as a result of their opinion will likely be because that's what they think will help you.
So if someone close to you criticises what you are doing, don't take it to heart, if you have strong integrity and a true belief in what you are doing then it won't damage you, stand your ground and always keep in mind that they want nothing more than the best for you.
You must ensure you don't waste your energy, some people will simply never understand and that's okay, I've seen people spend more energy on convincing others than actually working on what they want, make sure you don't fall into this trap and only spend your energy on those who really matter.
Sometimes it's a matter of showing them over telling them. Get to work and make it happen, let your results speak for itself.
In my experience a lot of people around you will try to advise you and tell you what you should and shouldn't do. I'm a firm believer that you can learn something from anyone however if you wanted to learn how to build a brick wall, you would not ask a carpenter, you'd ask a brick layer.
A lot of people around you in your life who you would not consider 'successful' may try to intrude on your life and tell you what's best for you, my point is to be cautious on who you take your advice from, don't take financial advise from someone who cannot successfully manage their own finances.
Take external advice with a pinch of salt unless you are certain that person knows what they are talking about, trust your own gut instinct and thinking above all else, you know yourself better than anyone. This is not to say you should be a lone wolf, always be willing to listen and learn however don't take every piece of advice you get as biblical and always think for yourself.
Part 5: The Solutions To Your Doubts
In the following section I will cover some methods of thinking which have helped me and many others in their trading journeys.
Firstly let me say that the best solution to any problem is persistence.
There's no magic pill in trading or in life, everyone will have their own unique journeys and hurdles they have to face and there will be no one way to fix every problem. If I was going to boil down success in any venture to any one reason, it would be persistence.
It doesn't matter how many challenges you face if you have the correct mindset, every set back is simply just a chance to get better.
Persistence derives from an unbreakable drive, if your why is big enough you will overcome any problem you face. That is the first solution here too, make sure you thoroughly understand why you are doing what you are doing and have clarity on what you want, take your time to figure this out and be as specific as possible.
Study and backtest:
That leads on well to my second point, sometimes it truly is just a matter of time and experience. Wisdom comes with experience and that is vital in the market place. What you can do to speed up your journey is gather more experience, how do you do that?
Well ensure your logging and review systems are well optimised, if you need suggestions for this, The Social Traders PRO covers all basis.
This allows you to make the most of each trade you take and be constantly learning all of the time. Back testing is a fantastic way to squeeze in more experience. That is why almost everyone tells you to BACKTEST, BACKTEST, BACKTEST!
It is because it allows you to trade and experience much more of the market in a much shorter space of time, you can go through months of data in a few hours – pairing this with fantastic trading logs and advanced self review systems will teach you more than any other experience in the market.
As I said previously doubt stems from a lack of clarity, if you've traded your system and been profitable on past data you'll be clear that it works, therefore you'll have no doubts.
You'll be clear on when you should be entering and not, when you should be managing and not, you won't second guess yourself because you will know exactly what you need to be doing and when. Back testing is by far the best way to learn as a trader so if you aren't doing it, you are only hurting yourself and your own progress.
This is not to say that back testing is everything, you learn a huge array of different psychological skills from throwing yourself into the real ring but if you haven't done any preparation prior to that then you have very little chance of success.
I like to think of back testing like studying for a test, you know that feeling when you're sitting in the exam hall and you see a question and you just have absolutely no clue. You feel weak and you panic. You will also know the flip side which is when you see a question you have absolute clarity on and you have no doubts, the same happens in the market place.
If you have done your study and prepared for the test you will have a far greater chance of success than otherwise and you will be able to go into the real scenario with confidence in your system.
Following on with my theme of clarity here, the next potential solution to your problem is your general lack of awareness in life, translated into trading.
You likely realise most of your mistakes after they have played out. Having greater awareness of your thinking and emotion allows you to catch yourself before you make those mistakes in the market and it will also help you identify those you'd otherwise miss, so that you are less likely to repeat that mistake moving forward.
Mediation is a fantastic way to develop awareness. There have been numerous biological studies on the effects of meditation on the brain, it alters the physiology of your brain in many beneficial ways – for example, it increases the size of the portion of your brain which allows you to 'let go'.
Some effects I have noticed from a regular meditation practice are: a greater sense of well being, dissociation from emotion, clearer and more precise thinking and a more content and calm state of mind. These are but a few of the benefits you can gain from meditation.
I like to think of mediation as simply a focused attention, it is not necessarily where you have to sit on the top of a mountain humming 'Om'. Practicing your awareness and ability to focus on one thing at a time is how I see mediation, after sustained practice it allows you to more easily access the 'flow state' and control your emotion/state of mind almost at will!
For the sake of 10-20 minutes a day this is a worthy use of your time and it's a habit I would recommend over any other. I will cover habits in detail in another edition.
Do not be afraid to reach out and get support. We are all on the same journey here at TST and we all understand what each one of us is going through.
Learning to trade is a lonely path and sometimes getting support from someone is the best way. Even just knowing you have people around you who want to help and see you succeed can drastically improve your confidence and remove your doubts, in turn improving your trading.
If you ever need support don't be afraid to reach out to me or another member of the team, clarity is the solution to your doubts and talking it through with someone will often times bring greater clarity.
Your feelings of doubt and fear often stem from not wanting to be wrong. You doubt the set up because you don't want to be wrong, you don't want to lose money, you don't want to market to go against you, you remove your position tool from the replay mode after hitting your stop loss saying "oh I wouldn't have actually taken that set up".
Failure is not the enemy of success, it is in fact the solution. If you doubled your rate of failure and never gave up you'd be moving twice as fast towards success. You must realise that you should never be afraid of being wrong.
If you have the back tested data behind you, the proper risk management in place, the correct review systems to identify your errors, you have nothing to fear and you should therefore have nothing to doubt about your system.
I am a firm believer that nothing is a failure if you learn something, it is simply an opportunity to become better, unless of course that failure kills you. Even then, you’ll walk it off if you have a big enough ‘why’.
To conclude I will remind you that you must embrace the journey, the path to becoming a successful trader is never easy. The market will test you and you have to accept that, you will fail countless times but that's how it has to be. You will doubt yourself many times but that's apart of the journey.
Only those who persist are worthy of mastering the forex market and reaping all of the rewards you will get as a result. Regularly remind yourself of your journey and how far you have come, I personally keep a list of 1% improvements I have made and quite often go back to read some of the earlier ones to remind myself of how far I've come and to ground myself on how far I still have to go.
If you practice the winners mindset on a regular basis, you'll rarely doubt yourself because you know in the long run you will come out on top no matter what happens.
We thank you for reading this week's addition to the Traders Dojo, have a great trading week and stay persistent – 'The Social Traders Team'
Why not check out our 'pro package'? You will gain access to our in-depth course as well as many more features – www.thesocialtraders.com
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I must disclose the fact that this piece is purely my own opinion and knowledge of the topic. If you feel we have plagiarised your work then please contact us directly.
Written by: Jack Hilton