What Does “Trade What You See” Really Mean?

"Trade what you see” is a phrase traders love to throw around, but the true meaning behind it is mostly unknown. Trading what you see has become a hollow phrase and its true meaning has been forgotten. By the end of this article you will understand why you probably don’t trade what you see either.

Illusion of Control Bias

“Believing one can control and influence the outcomes that one actually has no control over.” (Langer 1975) 2

We have recently talked about the illusion of control problem and this bias plays an important role when making subjective trading mistakes.

You make your analysis, you follow your rules, you pick a trade that fits your criteria and then it turns into a loss. No matter how good your analysis and how well you follow the rules, even the best setups will fail.

Traders think that the best setups won’t fail and then they get emotionally attached to the trade which, as we all know, leads to major losses and disasters. The chart may tell you that the long trade idea is not working, but you can’t accept that such a great setup is failing. You don’t trade what you see, you trade what you think should happen.

Anchoring Bias

“Anchoring is a psychological heuristic that describes the propensity to rely on the first piece of information encountered when making decisions.” – Investopedia 3

The Anchoring bias describes a phenomenon where traders suddenly set their whole price chart in relation to their entry price. When price moves against your position, it suddenly looks low and traders believe that a pullback is more likely. Or, when the trade moves in your favor, price starts to look high and traders become scared because they believe that a retracement is inevitable.

You don’t trade what you see; you trade from the perspective of your entry.

 What “trade what you see really means”

I hope that it became clear what the concept of trade what you see really means. Most traders re guilty of not knowing how to trade what they see and they are constantly acting on their emotional and impulsive reflexes rather than making objective and analysis-driven trading decisions.

With the help of this article you have the tools that help you become more aware of your trading behavior so that you can avoid negative patterns.