Lesson 2
Common Pitfalls
The framework is powerful but imperfect. Stay humble, stay systematic, and stay adaptable. Your edge comes from disciplined application, not perfect prediction.
After learning the framework, here are the most common mistakes β and how to avoid them.
Pitfall 1: Analysis Paralysis Symptom: So much data that you can't make decisions. Solution: Simplify to the core dashboard. If baskets conflict, default to 'unclear' and reduce position size.
Pitfall 2: Fighting the Regime Symptom: Holding conviction despite regime signals disagreeing. Solution: The regime doesn't care about your view. Align with the regime or accept you're speculating.
Pitfall 3: Recency Bias Symptom: Assuming the current regime will continue forever. Solution: Study historical regime transitions. They're more common than you think.
Pitfall 4: Complexity Creep Symptom: Adding more and more indicators, losing clarity. Solution: Every indicator must earn its place. If it doesn't provide actionable insight, remove it.
Pitfall 5: Narrative Trading Symptom: Trading based on stories ('inflation is dead', 'AI revolution') instead of data. Solution: Check every narrative against the framework. Narratives are often wrong or late.
Pitfall 6: Ignoring Position Sizing Symptom: Good ideas, wrong size, blown account. Solution: Risk management is not optional. Size for uncertainty.
Pitfall 7: Failure to Adapt Symptom: Framework becomes dogma, missing when it fails. Solution: The framework is a tool, not a religion. When it fails, ask why.
Check your understanding
Lesson Quiz
Quiz Check
What's the most common pitfall in macro trading?