The Overthinker

Chronic overthinking is very common. Maybe you don’t start out that way but take a solid draw down or two and you’re going to respond to that new trauma with an intense desire to “figure it out” or “know what’s next”. It’s a simple response to fear and a concern that you’ll be harmed in the action.

Let me tell you a little secret about trading.

The only thing at risk is the capital value between your entry and your stop x size.

For most of us overthinkers, there may be another variable at play. A false variable. It could be one of many. Maybe performance pressure, maybe you don’t want to be wrong. What if it was something else? Something more human.

I am sure you don’t mind being wrong when nothing is at risk. I am confident you don’t mind trying something new when you have no expectations. While expectations need to be dropped and risk accepted, it’s possible that overthinking has a different and more tangible source then simply “fear” or “expectations”. The good news is, you don’t need to know everything about the “why” when you know the “what”. Meaning, replace “why do I do what I do” with “what should I do”.

Regardless of the cause for your hesitation or overcomplication in markets, let’s explore a few moments that can be problematic and try to overthink our way around them before the market opens again.

This way, when that perfect setups comes, instead of hesitating, we hammer.

The Perfect Entry Error – The setup comes, you would try to understand the perfect entry. “Do I wait? Do I market in? Do I chase? ” The trade either comes and goes or you find yourself flailing into position, kicking yourself for your crappy entry before the trade has even begun to move.

Trying to “be perfect” is a fool’s errand. Not only to you not have this much control over the trade, there is no way to know what a perfect entry would look like.

Fix : Focus on where you’re wrong. This, unlike the entry, is a fixed variable. The entry will be what it will be. Set the stop and let it be.

The What’s Next Error : You pour over data in the evenings trying to build a sense of what might happen tomorrow so you can act on it. Where is everyone positioned? Do we go higher or lower? What if, what if, what if?

While you may have a sense of what happened today, you will never know what will happen tomorrow. You don’t need to know what will happen tomorrow.

Fix : Good trading is about acting correctly as opportunities arise. Instead of thinking about what could happen, simply observe what is happening. Memorize and study your best trades. Then wait for them to occur.

The What If Error : A great trade comes by, you see it… you watch it… you do nothing.

You just did the “what if”. This is when, instead of thinking about simple execution, trigger, stop, target, your mind was pulled into a swirl of in the moment what ifs.

Fix : There is no worse outcome to a trade other then to lose the capital between your entry and your stop x size. A stop out will not hurt you physically and it will not take more then you give it. The worst possible outcome for any trade is a stop. so take the trade!

The Hot Potato Error : You wait for a great trade. You enter at the right spot. Price goes your way… You see something, maybe take some off and add back when it comes back to your entry. You exit. Price continues on to your target and you gave up a perfect entry with the hot potato.

“Real time” thinking only gets us so far once the trade is on. Once in a trade, you are more likely to botch it by over managing then by taking a stop.

Fix : Look left. You’ve done the work to find the trade. You’ve put it on. The only thing left to do is ride it or take the stop. There is no reason to do all the work you’ve done only to take a few points. When you put on a trade, consider all the work you’ve done to get here. Value that work and you’ll value the trade.

Fear Filter Error : Markets have been going up. You see a great short but, for fear of getting your face ripped off, you pass on it. It’s the HOD. Price plummets without you. You hate yourself for having hesitated.

In the moment, fear was your primary focus. Not process, not the setup, not “where is my stop”. Simple and pure fear.

Fix : Replace fear of getting stopped out with fear of being nothing. Nobody. A failure. There is nothing worse in markets then to be in the right place, at the right time and do nothing about it. You put on that damn trade and you get ready to take the stop.

These are simply a handful of possible mental errors that may be keeping you from really nailing some of those big trades you see come through the charts.

Two major changes in my personal mindset have altered this experience completely.

  1. Markets are Random.

I cannot tell you what trades will work. I cannot tell you what trades I will take and I can’t tell you if I will find “the best trade” today, or any day. Let go of the idea that you have to do this “right” and just get doing it. Just take the trade! The result of this one is random. Take the stop. The result of 100 is not. Give yourself time to see what shakes out.

2. Do a Safety Check

Taking a stop, having a red day. These things cannot hurt you. You are going to be OK. I know this sounds weird and many people will not like the idea. (we’re all super tough and emotionless futures traders after all) The more “human” you are in your ability to relate to other people, the less “pain” in markets you’ll be able to take. Look at your stop size. Look at the cost of the trade. Open up the stop a bit to let it breath and drop your size. As the trade starts to move, repeat to yourself “I am not my account”. Now, take the stop without reaction.

If these things weren’t common issues, every trader you meet would be rolling in Benjamin’s.

The reality is, these are issues for every person who fires up a trading account. No matter the product, no matter the timeframe.

Don’t believe me that your emotional generosity could be “connecting” you to your account through basic human empathy? Watch this : LINK