Confidence can be an important psychological tool for the trader – important enough to make the difference between a winning trade and a losing trade. When you develop your trading plan, it is obviously important that you have confidence in its accuracy and usefulness and in your belief that you can follow your plan closely and execute it successfully. To explain the same let me give a recent example where we have been discussing on the importance of 7546 on Nifty Spot which is major demand zone, Holding above the same we can see 7684/7730. Nifty did made a low of 7516 and just moved up 100 points in matter if minuted today. If we do not have confidence and trust on our plan, such trades can never be executed.
Often, traders fall into a mental “I know it all” trap, where they use their confidence to nurture their ego instead of using it to be appropriately decisive in their trading decisions. Such misplaced confidence can be crippling to trading success, because any potential influence from the Social Media, Other trades opinion that could sway the trader from sticking to his trading plan will have far more power. Many traders make the correct plan but during course of day listen to other trades and just forget their plan and traders as per others plan, Eventually taking loss. If he has stick to its trading plan would have end up in profit.
If you’re caught in this trap, you’ll tend to make these magnified suggestions your own. When you do this, you give yourself logical reason and justification to act on them, even if it means you have to sway from your trading plan. Falling into this trap is characterized by being confident about things you really don’t know, instead of being confident about the things you know well, such as your trading plan.
Alternatively, when you have the right kind of confidence, you empower yourself to stick to your trading plan and deflect fear and doubt. Before making a trading decision, be certain that you’re confident about what you’re confident about. The key is not to be confident about what you don’t know (especially when it comes to others’ opinions) but to be confident about your knowledge of objective facts and the trading plan that you have so laboriously developed.
To prevent misplacing your confidence, review decisions that you’ve made confidently but that turned out to be incorrect, evaluating exactly where your confidence was placed. Most of the time, you’ll discover that your decision was based on a suggestion not your own, but that you had made your own.
The market wants you to admit when you are wrong. Commit to admit. If the market is always right, and it is, then go ahead and let the market know NOW that you understand and accept its omnipotence.
Let everyone know you will be wrong more often than right and that you are OK with that. If the market knows you do not mind being wrong the market will leave you alone.