Hey trader,
Throughout history, philosophers have debated paradoxes about everything in Heaven and on Earth.
Consider: if you have a mountain of sand and remove one grain at a time, at what point is it no longer a "mountain"?
Or if God is omnipotent, can He create a rock so large that even He cannot lift it?
These questions are meant to stimulate discussion.
The Omnipotent Paradox
If God is omnipotent but can't make a rock bigger than He can lift, then He's not omnipotent. If He can create a rock that big, then He's also not omnipotent because He can't lift it.
You may be thinking this is absurd and impossible to relate to trading. Here is where we'll make the parallel.
You Think You're Smarter Than You Are
No human is omnipotent or omniscient. However, we spend significant time designing and testing a trading system. We learn, and we become knowledgeable about our system.
We have the rules. We have the data. We know what the expected outcome should be.
Then suddenly, in the middle of a market day, we unwittingly force ourselves into a paradox. We think we are smarter than we are.
Let me explain. We spent all that time creating conscious competency. The knowledge is there.
Yet when we're facing trades, we see price move and decide in a moment not to follow our rules. We take a trade based on impulse.
In that instant, we see our current state as smarter than the intelligence we worked for in testing our system. We think we are smarter than ourselves.
The Core Paradox
Just as God cannot simultaneously be all-powerful and unable to lift a rock, you cannot simultaneously be your most intelligent self and override that intelligence with impulse.
We override the data-backed intelligence and replace it with momentary intelligence.
Therein lies the paradox: it is not possible to be smarter than we are. Yes, we can grow our intelligence, but our current state can't exceed our current state.
The Question
Why do we throw away hours, days, weeks, and years of study to react as though a reactionary trade has more value than all of our previous effort?
This behavior is self-defeating. Yet I don't know a trader who doesn't do it.
What This Looks Like
Your system generates a sell signal at key resistance, but you hold because "this time feels different" and the momentum looks strong.
Your rules say wait for a pullback to the 20-period moving average, but you enter immediately because you're afraid of missing the move. You watch the stock reverse against you within minutes.
Your trading plan states "no trades in the first 30 minutes," yet you jump in during the opening chaos and get whipsawed.
We replace the signal with "this looks overextended." We dismiss the entry because it doesn't "feel right."
We chase a move because the market is going up, rather than waiting for proper entry. We buy the top tick of the day.
Does This Resonate?
If it doesn't, maybe I'm in a philosophical debate with myself, and that's alright.
If it does resonate with you, use this time to remind yourself that you can't be smarter than you are. Trust the time and effort that created your intelligence, that made you market "smart."
This is not simply a paradox that creates discussion. If we don't see the paradox in ourselves, it will waste time and significant money.
How to Disable the Paradox
Write your rules where you can see them. Keep a physical card or digital note visible on your trading screen with your core rules listed. Before every trade, read them.
Use automated alerts. Set up your platform to only notify you when your specific criteria are met. This removes the temptation to act on price movement that doesn't match your system.
Implement a mandatory pause. When you feel the urge to override your rules, set a timer for 5 minutes. If the setup still meets your criteria after the pause, proceed.
Often, the impulse will have passed.
Journal every rule break. Document each time you override your system and the outcome. Review this journal weekly to see the cost of your "momentary intelligence."
Trust Yourself
I encourage all of you to trust the version of you that put in the effort and learned, not the momentary brain that thinks it is omniscient.
The paradox is clear: you cannot be smarter than yourself. Stop the internal debate and follow your rules.
Blake Young
Senior Market Strategist, TheoTrade