In developing Strategies it may be preferable to have an open mind to the evidence that is presented against the standards to which the individual trader finds important in the market he is in.
The idea of a conviction is having a well founded belief in the truth of a viewpoint. Suppose we were looking for evidence of whether a market will go up or down next. We may have a rudimentary signal such as a moving average crossover. Now lets try to make a case for this. In addition to this moving average crossover which indicates (let's say) more demand than supply on an immediate basis there is another bullish piece of evidence - the trend being an uptrend on the time frame we are trading within.Add to that a bullish divergence of the price and macd or stochastics.The chances that this is a correct conviction are then further enhanced by an observation of time and sales that indicate large blocks being sold at the ask. Volume picking up indicates stronger buying interest than had previously existed. A longer term chart also shows a bullish trend.The news and fundamental information on the market has been favorable.
The risk reward of the trade in this market environment is essentially very positive.
Finally true conviction occurs when this trade produces a profit and similar ones prove to be profitable for you in your trading. Much like justice in the court room a conviction of a different variety is determined by a scale of probabilities. Don't ignore evidence that is either for or against your initial signal in determining your conviction of having a correct trade. It could cost you.
