Something that’s hard for traders to understand is the concept that all moments in the Market are independent from each other; each moment in time is unique in the manner that the Market processes it. We humans are different, however; we tend to create Pavlovian responses to specific “trigger” events through learned behavior. 
 
For example, when we’re young we figure out very quickly which things bring us pleasure, and which experiences bring us pain. A bag of Halloween candy will put a smile on our face, but picking up the cat and turning it upside down might get us clawed for our mischief. As we experience life, we catalog and inventory these experiences, which we eventually call “wisdom.” 
 
But then we start to tangle with the Market and we expect the same predictable response from stimuli and patterns. We note certain responses from the market to inputs, and we mentally catalog those responses as well. Pretty soon you’ve got it all figured out!
 
“I know that when I see the price test the lower edge of the Opening Range from below, it will always reject that level!” or “Every time I see the stochastic cross to the upside, it’s a great buy!”
 
We then entangle these beliefs with what’s called “recency bias” where we tend to give more weight to recent experiences over the span of time. Let me give you an example from this week that will help you understand how to pull all of these concepts together: 
 
A little while back on a Monday we had a pretty nice “range” day; the price stayed in a relatively tight range all day. That led to a nice Zero DTE Iron Butterfly trade. On Tuesday, the same pattern showed up for a “range trade” entry, same as Monday…and within ten minutes I had to close the trade for a loss. Something shifted in the sentiment and the “range” day became a “trend” day to the downside. 
 
Most new retail traders would immediately abandon that setup, not because it worked on Monday, but specifically because it DID NOT work on Tuesday. This is Recency Bias in action. They will sit on their hands for the next five good setups just because it failed that one time. 
 
Would you care to guess what will likely happen when they finally gather the courage to enter again on the next setup? More than likely it will fail on them again. This is the classic symptom of “trading NOT to lose” instead of “trading to win.” 
 
Learn to accept the fact that every moment in the Market is unique. By doing so, you can start to wean yourself off of the human need to apply recency bias to what you believe “should” happen. 
 
In your corner….Doc Severson

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​Something that I see on an ongoing basis is retail traders diving full-on into a new strategy, immediately failing, and then hopping onto ANOTHER new strategy and repeating the experience. Instead of having ten years of experience in trading, most retail traders get one year of experience ten times, and it’s not additive. 
 
It’s frustrating for the trader since they never seem to get anywhere. Sound familiar? It should, I went through this exact pattern myself. I knew dozens of different options strategies, could employ about a hundred different technical indicators, and knew how to scan through thousands of stocks. I knew a little about a lot of things. Trouble is, I wasn’t making any money. 
 
And then I did something which was to become the tipping point for me - I stopped trading everything. I closed every open position and hit the big red “reset” button. 
 
I resolved to do NOTHING until I could define ONE chart and ONE strategy that I would master. Just one. If I could not get one strategy to work on one chart, then multiplying the complexity would not help. 
 
And it worked. In no time I had settled on the SPX chart and the iron condor; this combination seemed to give me the best chance for success, and it wasn’t but six months later that I turned in my two-week notice. Once you really get behind something and go deep, I found that I had no choice but to burn my bridges and go solo. 
 
So if you have already found your “one thing,” then how do you go about “earning the right” to ramp up your capital? 
 
Something that I advise new members of the Daily Target 100 trading room is to start out with a simulated trading environment. Learn the MECHANICS of the trade; how to enter, how to defend, and how to exit. If you can’t get this to work in a sim environment, then wasting live money won’t help. Commit to perfect mechanics before you move on to live capital. 
 
And when you go live, consider just trading one contract. Even if you have a larger account, and ESPECIALLY if you have a larger account. Create a business plan for yourself and identify performance metrics that you must meet before you increase position size. 
 
Earn the right. Be methodical. Find your one thing and specialize in it. That’s the only way that I know of that actually works. 
 
In your corner…Doc Severson

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