When it comes to trading, we try to put the odds on our side to create a better opportunity to extract money from the market. Many traders do this by using technical analysis to gain an edge. Here is a brief reminder that you need to keep trying to put the odds on your side even though it may not always work out.

Trading Frustration

Several times a week I hear stories of frustration from option traders. Just this morning, for example, I had a trader ask me what he had done wrong. He was expecting a bullish reversal off a support level, and he got a bullish confirmation candle. But after entering, the stock went south (see chart below).

I have news for him, and for you too if you need to be reminded: Not every “odds on your side” technical analysis setup is going to work. If you are doing it properly, it should work more times than not. But when it doesn’t, traders often get frustrated and don’t trust the setup when it happens again. That is when I need to remind them that the odds are still on their side and more times than not the underlying will behave as forecast.

Trust the Odds

I like to say that support and resistance have about a 70% to 80% chance of not letting the underlying through. To me, those are some really good odds. Still, it is not 100%. I often like to remind traders that I would take the trade again if the same setup presented itself. There is also market sentiment that can move the underlying. You could have the best potential bullish setup, like the one above, and then the market winds up tanking that day.

Final Thoughts

Trust the odds when you get the setups you are looking for. They may not always work out, but that should not deter you from your plan. Trust me, it can be very frustrating. But look beyond that and trust yourself and your “odds on your side” setup.

John Kmiecik, Market Taker Mentoring