Avoid Narrative Thinking
One of the quietest confidence-killers in trading, especially for retail traders, is something most people don’t even realize they’re doing: narrative thinking.
Narrative thinking happens when you start telling yourself a story about what the market should do.
- “It should bounce from here.”
- “It should fill the gap.”
- “It should go back to fair value.”
- “The Fed said X, so the market should do Y.”
In my trading career I’ve lost too many times by building stories instead of following signals. You may be falling into the same trap.
The market doesn’t care about what seems logical. It doesn’t care what feels deserved, fair, or reasonable. It moves on order flow and price—nothing else.
Narratives make you feel informed, prepared, even superior. They give you the illusion of knowing something. But there’s a problem: When you believe a story, you might:
- increase size
- widen stops
- hold losing trades longer
- ignore signals that conflict with “your view”
- convince yourself the market is wrong, and you are right
This is how many traders blow up—not because their strategy lost its edge, but because they become attached to their own storyline.
Signals are clean and consistent. However, following ONLY signals requires discipline. Volatility, momentum, trend, they don’t care about what “should” happen. They only reflect what has happened. The retail traders who thrive are the ones who trade what they see, not what they imagine.
The human brain seems to love certainty. It wants patterns and explanations. When the market behaves unpredictably, your mind rushes in with a comforting story.
“This is temporary.”
“It’ll turn around.”
“This is just a shakeout.”
“I know how this ends.”
But disciplined traders, those who’ve been in the trenches for decades, know that confidence and consistency come from observation, not imagination.
To keep your execution sharp and your exposure controlled, try these tips:
- Label Your Bias Out Loud: Before entering a trade, say or write: “My bias is long/short, but I will follow my signal.” This separates your opinion from your execution.
- Ask the Only Question That Matters: Not “What should the market do?” Instead: “What is price doing right now?”
- Let Invalidated Signals End the Story: If your signal breaks, the trade is done, period. Don’t rescue it with a narrative.
Your trading success is not built on clever predictions. It’s built on your ability to stay neutral, follow signals, and walk away from seductive stories that pull you off your plan.
To your trading success,
Mike Siewruk
PS: Was this advice helpful? Feel free to pass this link for a free membership to Trade Aptitude along to your trading buddies: https://www.thedailymarketforecast.com/signup