InDecision Academy · indecision.io/cheatsheets
Trading Philosophy & InDecision Framework
Trading Philosophy
The mental frameworks that separate profitable traders from the crowd.
Market Structure
Is the market making higher highs and higher lows (uptrend) or lower highs and lower lows (downtrend)? Structure is the map. Trade with it, not against it.
- ▸Higher highs + higher lows = uptrend. Trade WITH structure, not against.
- ▸Daily timeframe is primary, 4H confirms, 1H enters.
- ▸If structure is unclear (choppy), reduce size by 50% or sit out entirely.
- ▸Score: 0-3 if against you, 4-6 if mixed, 7-10 if clearly in your favor.
Volume Confirmation
Volume is the lie detector. Moves on low volume are suspect. Breakouts on high volume are real. If price moves without volume, wait for confirmation.
- ▸Breakout candles should have 1.5-2x average volume or higher to be trusted.
- ▸Declining volume on a rally = distribution. Smart money is selling into your buy.
- ▸Volume spikes at key levels confirm institutional interest. Low volume = retail noise.
- ▸Use OBV (On-Balance Volume) as a leading indicator: if OBV diverges from price, trust OBV.
Key Level Context
Is the pattern forming at a significant support, resistance, or prior high/low? Patterns at key levels carry 3x the weight of patterns in empty space.
- ▸Mark weekly S/R levels first. These are the battlegrounds where big money acts.
- ▸A pattern at a key level (e.g., double bottom at weekly support) is 3x more reliable than mid-range.
- ▸Confluences compound: if a Fibonacci level, horizontal support, and trendline all align, the level is strong.
- ▸Score: 0-3 if no key level nearby, 4-6 if near one level, 7-10 if multiple confluences.
Momentum Alignment
Are short, mid, and long-term momentum indicators aligned? When all three point the same direction, the path of least resistance is clear.
- ▸Use RSI (14) on daily + MACD on 4H + Stochastic on 1H for multi-timeframe alignment.
- ▸All three bullish = strong trend. Mixed signals = reduce size or pass.
- ▸Momentum divergence (price makes new high, RSI doesn't) is the strongest reversal signal.
- ▸Score: 0-3 if momentum opposes your trade, 4-6 if mixed, 7-10 if fully aligned.
Sentiment Divergence
What is the crowd feeling vs. what price is doing? When the crowd is extremely fearful and price is holding, or extremely greedy and price is stalling — that’s alpha.
- ▸Fear & Greed Index at extremes (< 20 or > 80) is a contrarian signal, not a confirmation.
- ▸Social media euphoria at highs = distribution. Despair at lows = accumulation.
- ▸Funding rates on perps: extreme positive = overleveraged longs (bearish). Extreme negative = overleveraged shorts (bullish).
- ▸Score: 0-3 if sentiment confirms the crowd, 4-6 if neutral, 7-10 if you're fading the herd at extremes.
On-Chain Reality
For crypto: are wallets accumulating or distributing? Is exchange supply shrinking (bullish) or growing (bearish)? Chain data is the ground truth.
- ▸Exchange inflows rising = selling pressure incoming. Exchange outflows = accumulation (bullish).
- ▸Whale wallet activity (1000+ BTC) moving to cold storage = long-term bullish conviction.
- ▸MVRV Z-Score above 7 = overvalued (consider selling). Below 0.1 = undervalued (consider buying).
- ▸Score: 0-3 if on-chain contradicts your thesis, 4-6 if neutral, 7-10 if on-chain confirms the trade.
Score your setup with the interactive Setup Scorecard →
Never risk more than 1-2% of capital per trade
Why: At 1% risk, you can absorb 10 consecutive losses and still have 90% of your capital. At 5% risk, 10 losses = 50% gone, and you need a 100% gain just to recover.
Define your stop loss BEFORE entering — not after
Why: Once you're in a trade, emotion takes over. You'll move your stop, widen it, or remove it entirely. Pre-defined stops remove the decision from your emotional brain.
Your R:R must be at least 2:1. No exceptions.
Why: At 2:1 R:R, you only need to win 33% of trades to break even. At 1:1, you need 50%. The math is unforgiving — skew it in your favor or don't play.
Size down when uncertain. Size up when conditions are ideal.
Why: Your best trades should carry the most weight. Sizing equally across all setups means your C-grade ideas dilute your A-grade ones.
A missed trade is $0 loss. A bad trade can be catastrophic.
Why: FOMO costs more than patience. The market offers new setups every day. Capital you lost on a bad trade is gone permanently.
Cut losers fast. Let winners breathe. This is the whole game.
Why: The natural human instinct is the opposite: hold losers (hoping they recover) and cut winners (locking in gains). Profitable trading requires overriding this instinct every single time.
Never average down on a losing position without a plan.
Why: Averaging down without a thesis is just doubling your bet after losing. If the original reason for the trade is invalidated, adding more capital makes the inevitable loss larger.
Protect capital first. Profits are a byproduct of surviving.
Why: A 50% drawdown requires a 100% gain to recover. A 90% drawdown requires 900%. Survival IS the strategy — everything else is secondary.
Recency Bias
Assuming the recent trend will continue forever. Markets mean-revert. The last 3 green candles don't guarantee a 4th.
Confirmation Bias
Only looking for evidence that supports your existing position. Seek out the strongest argument against your trade before entering.
Loss Aversion
Holding losers too long to avoid 'realizing' the loss. A paper loss is still a loss — and it gets worse the longer you wait.
FOMO
Fear Of Missing Out drives late entries at the worst price. If you missed the move, the next one is coming. Be patient.
Overconfidence
After a winning streak, traders take on too much risk. Markets are humbling by design — never mistake luck for edge.
Anchoring
Fixating on a prior price as a 'fair value' anchor. Markets don't care what you paid. The only price that matters is the current one.
Availability Heuristic
You overweight recent dramatic events (a big loss or win) when making decisions. One bad trade shouldn't change your entire strategy — but your brain will try to make it.
Hindsight Bias
After the fact, you believe you 'knew it all along.' This prevents learning from mistakes because you never honestly assess what you actually knew at the time of the decision.
Clustering Illusion
You see patterns in random data — 3 wins in a row feels like a hot streak, not statistical noise. This leads to oversizing on the 4th trade and giving back all your gains.
Illusion of Control
You believe you can control outcomes by adjusting entries, watching charts harder, or 'willing' the trade to work. The market doesn't know you exist. Accept uncertainty.
Take the Cognitive Bias Self-Test →
“Markets are made of humans”
Every candle is a vote. Every pattern is a collective emotional state. Fear, greed, hope, denial — all of it shows up in the chart.
“Price discounts everything”
By the time you read the news, the smart money already moved. Trade what you see, not what you feel. The chart knows first.
“Crowd psychology is predictable”
Retail buys tops (greed peak) and sells bottoms (fear peak). Position yourself where the crowd will be wrong, not where they already are.
“Trends persist longer than logic suggests”
"It can't go higher" and "it can't go lower" are not trading strategies. Don't fight a trend without evidence it's ending.
Complete every item before opening your first chart of the day.
Reviewed yesterday's trades (what worked, what didn't)
Checked portfolio heat (< 5%)
Identified today's key levels on the daily chart
Set maximum number of trades for today (2-3 for beginners)
Committed to honoring stops (no moving them)
Emotional check: am I trading to make money or to feel something?
Track your psychology with the Psychology Playbook →