Execute Fearlessly
It’s been a long year of reflection and growth since Fakeout or Breakout? was published in this blog on March 25th of 2022. It contained the following quote:
The crypto market is damn good at one thing: maximum pain. It lures the unsuspecting trader in with small gains here and there, and when you’ve finally gone all-in…
Kaboom!
The results are in and it’s safe to say it wasn’t the local bottom many were hoping for. Here’s the weekly for some context:
Bitcoin proceeded to slaughter bulls for the next 8 months before putting in the yearly low at 15.5k.
Kaboom!
Since that low, BTC has risen +100% in five months, and now debate of whether or not we’ve received “bull market confirmation” continues to rage on twitter. My feed is full of tweets like “We can remain macro bearish up to 43k!” (lookin’ at you, Capo) or “The bull run was actually never invalidated because the monthly low at 9k is still intact!” (lookin’ at you, Birb).
This got me thinking: what in the fuck is confirmation, anyway? On the surface, the idea of waiting for levels to be “reclaimed” might make sense, kind of like reverse DCA’ing. If your timeline is 10 years and you’re only going to sell at 100k, then sure, this is a nice way to accumulate (see term investing). But if you want to actually trade, this is likely detrimental to your progress.
Waiting for confirmation means that you’re intentionally buying further from your point of invalidation, which should also be the same as your stop loss. Widening your stop loss is an effective way to seriously reduce your potential R per trade, which also means you need to be right more often in order to be profitable. So you’ve just made the game immeasurably harder for yourself by self-imposed limitations. I am not suggesting that you need to catch every bottom and sell every top, but are you seriously going to wait for price to rise 200% before buying again?
Remember when bullish “confirmation” looked something like this?
Wow, a new all-time high and retest of previous all-time high resistance! 100k here we come🚀🚀!
Well, turns out there were a fuck-ton of sell orders above the most significant high of all time. If instead of riding weeks of obvious momentum, you wanted “bullish confirmation”, you got rekt. And since bullish invalidation was miles away at the 39k low, retail continued to inflict maximum self-harm by buying all the way down.
So, where are we now? Have we entered a new bullish cycle? Is 15k the macro low?
Who the fuck cares!
Weekly momentum is obviously bullish and there’s untapped liquidity overhead. That’s really all you need to know. The recent weekly close printed a sweep of a low. If you took this setup and are targeting the next high, you’d be in a 4.8R trade that is with the current trend.
And here’s the kicker: because of how close the entry is to invalidation, this setup only needs roughly a 20% win rate to be profitable. Why wait for confirmation? Take this every time!
Hence, the longer you wait for confirmation, the longer you delay execution in exchange for emotional support. I’m bringing this up because failure of execution is the number one reason why traders fail. It’s why you can hand a trader the rules to a profitable system and he will fail due to his inability to execute.
That’s because the edge is the trader, not the system.
The more you research different trading systems and backtest, the more you realize that it’s not hard to stumble across a ruleset that looks profitable across a year’s worth of data on a given pair. But the work doesn’t stop there. The real question is, are you going to be able to fearlessly execute those rules even when you’ve taken your 7th loss in a row at full risk? People smarter than me have written books with titles like “The Psychology of Trading”. Here’s all of those books distilled into two words: execute fearlessly.
The greater point I’m trying to make is this: because pretty much anything can be a statistical edge, instead of changing your psychology to the trading system, simply change your system to match with your psychology.
Where to start? My personal recommendation is to narrow your trading times down to either a 1 or 2 hour session and then work backwards from there. Crypto twitter and 24/7 markets make one feel that they need to stay awake at all hours of the night in order to not miss a move on some obscure alt-coin. Fuck that. I guarantee that 99.99% of traders will perform better by trading less (and with more sleep).
Next? Narrow your instrument list to one or two pairs. Different pairs trade differently at different times. In the same way that a sucessful business finds a niche and builds a good reputation in a marketplace, the goal here is to specialize in something specific. For example, 5m sweeps + and divergences on NQ at the New York open between 9:30a-10a ET, or moving average crossovers on BTC during the NY/London overlap between 8a-12a ET. When you’re only trading a few hours every day, it’s easy to see how utterly irrelevant the bull vs bear arguments become. This narrowed focus will allow you to build data and confidence (those two things are the same, btw) that will ultimately allow you to execute fearlessly.
Forget the macro trends and go become the master of your own dojo.
GET. AFTER. IT
