Probabilities vs. expectations

I expect to wake up tomorrow morning and not die during the night.

I expect that I will be able to get out of bed and know how to walk to the kitchen.

I expect that the refrigerator is still working and that my juice will be cold inside.

I expect my morning banana will not taste like cardboard.

I expect my car will start.

I expect the other person will stop at the red light.

I expect that I won't get hit by lightning.

Seeing that expectations are what normal everyday life is founded on, is it natural to think that you can expect a stock to trade in a particular direction? Only if you want to become a loser.

The markets and stocks are not everyday life. They have the ability to do anything at any time. The only thing 100% certain is that they are 100% unpredictable.

If you have expectations, it means you have an emotional attachment or interest in an event outcome. Do you expect to make money, have a winning trade, make a right decision? When they happen are you giddy with excitement, gushing to all who will listen that you are so smart. What happens when you are wrong? How about wrong ten times in a row? If you live the highs you will be living the lows. Your expectations will destroy your confidence and thus your account. Your ego will take you back to childhood where you will throw tantrums and stomp your feet looking for a sympathetic ear. "The markets aren't fair" you say. Well the markets don't give a shit what your want or when you want it.

Now if instead you trade the probability of a outcome to an event, you can put a wall up between yourself as a person who is on autopilot accepting everyday expectations and you as a successful trader who is ruthless in the execution of your plan. Thinking, trusting and truly believing in probabilities will save the day for you. When you think that "based on my experience, seeing a very similiar situation before, odds are that the near future direction of this stock is this way. However since this event is unrelated in every way to my past memories, I must choose the point at which my decision will be proven wrong and set a protective stop here."

When you think this way, it doesn't matter whether you are right or wrong. You are simply carrying out your trading plan based on your experience/edge. Playing the averages. You don't get hurt by losing trades. You don't get happy over winning trades. Whatever happens, happens. Being cold and calculating brings you as a trader closer to the machines that are running the show these days.

The machines have their algorithms. Big and fast and scary most would say. Executions in fractions of milliseconds. Unbeatable. HHmmff. Not true. You have the advantage not them. The advantage is that they show you what to do and when to do it when you follow their lead. Getting into the flow and riding on the coattails of the movers pays great dividends. You don't have to innovate, only imitate. And you can choose when to play or not. Picking your spot. Exploiting weakness.

To be able to do this a trader must not be stuck thinking they know what will happen next. I never know what will happen next. I'm not stuck on being short or long at any time. Whatever side has the least resistance is the side I'll be on. I have no expectations apart from carrying out my plan. My simple plan. Unburdened by news or opinions.

1. Get into the flow.

2. Feel the momentum.

3. Confirm what the markets are doing.

4. Check the clock. Are new candles about to begin/end or mid cycle.

5. Enter the trade. Limit order if there is time, market if not.

6. Set stop at price level where my basis for the trade will be proven wrong.

7. Manage the trade. (steps 1-4 again)

Simple. Easy to remember. Easy to execute. Stress free. No expectations. You can be a machine yourself.