Let’s take a brief look at Monday’s daily chart from the E-mini Nasdaq futures (NQ). And let’s ignore any hindsight analysis, given that you possibly already know the outcome of this price sequence. The chart and subsequent discussion occurred at this point here (as did the writing of this post):

<image: Remove Certainties from your Analysis>

And now, a comment that followed in email discussion with a trader:

  • “The collapse is going to be epic if price breaks the 2/24 low”

<image: Remove Certainties from your Analysis>

My response:

  • “Maybe. Maybe not.”

This wasn’t the main point of our email Q&A. Just a side discussion.

But it’s a type of comment that concerns me.

There are NEVER any certainties.

And becoming fixed in mindset, expecting one particular market outcome, can be absolutely devastating at those times when orderflow takes another path.

So catch yourself whenever you find yourself expressing a certainty in your market analysis. And correct it.

Here’s a simple technique to help shift your thinking from certainties to probabilities.

  • Add a degree of probability to your analysis.
  • And NEVER make it more than 70%.

The collapse is going to be epic if price breaks the 2/24 low… maybe 70% probability.

This forces you to accept that, while 7 out of 10 times you might be right, there is still a 3 out of 10 chance that something else might occur.

And so you’d best be aware of what that might look like. And how to quickly recognise it and respond.

<image: Remove Certainties from your Analysis>

You don’t need any great accuracy in your statement of probability.

  • 50/50 for no real expectations.
  • 60/40 for a slight preference for one outcome over another.
  • 70/30 for those slam-dunk, guaranteed bet-the-farm opportunities.

But never 100%.

<image: Remove Certainties from your Analysis>

<image: Remove Certainties from your Analysis>

<image: Remove Certainties from your Analysis>

Remove certainties from your analysis.

Add a degree of probability to any statements of analysis or expectation. And NEVER make it more than 70%.

This forces you to accept that, while 7 out of 10 times you might be right, there is still a 3 out of 10 chance that something else might occur.

And so you’d best be aware of what that might look like. And how to quickly recognise it and respond.

Happy trading,

Lance Beggs

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6 Comments

  1. Hi Lance,Thank You so much,I have a question about trading journal.I scalp EURUSD and when my trading journal is very simple(just recording daily loss/profit,because I take a lot of trades) I keep being profitable almost every day but when my trading journal is complicated(recording buy/sell,lot size,risk,reward,…) my profit lower down significantly.off course I have trading plan,checklist and I follow my rules.so should I just keep it simple?

    1. Our intent is not to record data for the sake of it. Or because everyone says we should. We want to create a resource that can help assess our performance and identify areas for further growth and development.

      If the act of recording data for every trade is distracting from the process of trading, then a simpler journal system may be fine.

      The question is though, are you getting the data you need from your daily stats?

      I’d suggest that it needs more than just “profit or loss”. You can record significantly more data. Number of wins, number of losses, Average win, average loss, maximum win, maximum loss, MAE/MFE stats etc. This is still a once a day thing, done after the session has closed, but offers data that can be used to identify deficiences or strengths. And to monitor trends over time (or alert you to deviation from trends).

      If your platform lets you do this, you may also be able to separate these stats into subgroups such as per hour or half hour.

      So yes, simple is good. You want it as simple as you can. But not so simple that it no longer adds value.

  2. Thank you for your reply
    Yes I use daily history in mt5 for assessing performance each day
    my win rate is about 90% an R/R about 0.3

    1. That’s an interesting way to trade. 🙂

      Daily stats from your platform sound just fine then. No need to concern yourself with excess recording of data that won’t serve any purpose.

      Best of luck,
      Lance.

  3. Whenever I was overconfident about an analysis, two things happened:
    1. The market taught me to accept that this market is a possibility, not a certainty, by moving in the opposite direction of my entry and losing.
    2. I lost the ability to re-enter in a possibly correct direction

    But it’s been a few months that I have a real view of the market and I consider a counter point for all my decisions so that if something happens contrary to my first thought, I can have the best performance.

    Your articles helped me a lot in this path and THANK YOU SO MUCH MR. LANCE

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