There are lots of reasons why a trader might not execute their plan properly and not wanting to be wrong is a big

one. But virtually all traders in existence understand that it’s

impossible to take winners 100% of the time and avoid all losses.

All data on your charts is historical – you’re only able to assess what has happened

already. As smart as you are you can never really know who is sitting ready to act and

so a big trade or unexpected event can change everyone’s perspective of what a fair price currently is – regardless of what

has traded before.

Then there’s the fact that the market can make you wrong for a tick whether or not the concept for a specific trade was valid or not. Until you’ve closed

the trade, you cannot be certain that it will achieve your profit target.

So if we know we will be wrong at various points in our trading, then what’s the

reason why we often see traders having a hard time in “letting go” of unsuccessful trades? Surely by knowing that we are all but certain to take losing trades on any

given day, it should be easy to just click the mouse and exit the trade, right?

Wrong. And I believe it’s not really to do with being wrong at all but all

about the way in which a trader loses that leads to many of the problems

they face.

We have a deeply ingrained aversion to being made to feel/look like a

fool.It’s certainly observable in many walks of life. People often revel in

denigrating those who have said or done something silly or naïve. Many a comedy moment is centered on this

type of thing (think Homer).

At many mainstream schools, much of the learning is focused on being right

or wrong as opposed to reasoning (part of the problem I believe with

producing genuinely capable people at the end of education – rather than

people who have learnt to pass exams).

So it is with trading that not being made to feel like a fool, not having

your money taken from you in a silly way and proving to yourself that you really do know what you’re doing can become a millstone around a trader’s

neck.

This taps into some pretty strong instincts – ones which when we’re already in a heightened state of emotion, can be

extremely difficult to negate. The compounding effect of multiple

experiences can lock you into negative behavior patterns until you’re really able to

recognize what’s going on.

Here is just a sample of situations if you’re still not sure what I’ve been

rambling on about:-

• Getting stopped out to the tick again – you don’t want to be the sucker at the

table who keeps getting their stop taken out right before the market moves to

target. Another observation is where a trader just keeps moving their stop until they are so committed to the trade that

they refuse to take the loss at all.

• You take a loss because you missed an important piece of information that’s normally part of your decision making

process because either you weren’t paying attention or didn’t prepare properly. You want to avert this feeling of inadequacy

and acting in a stupid way and so only take high probability setups –

in reality ones which you feel will definitely be winners, so when they lose you either refuse to accept the loss or feel betrayed by the market.

• The market keeps acting in a certain way that it doesn’t usually do and

you’re taking loser after loser because of this. You don’t want to feel like a fool when you stop trading and it

reverts to its usual self so rather than take stock you keep trading and taking

losers.

Either this or you start trading “off plan” which could be disastrous. You

start to feel like you know what’s going to happen whilst you’re in a trade, so you mess with your plan “on the fly”.

• You take an impulse trade that ends up a losing and you know you should

have followed your plan instead. Rather than trading your plan, you try

to make up for it by taking further impulse trades whilst digging yourself

into a deeper and deeper hole.

Getting back to the title of this piece – “Never be Wrong Again” – I’ll now explain what I mean. Trading is as

much to do with changing your mindset and therefore behavior as it is

to do with strategies, money management and everything else.

Perhaps more so as everything else is dependent on how well you grasp these

concepts. Being right is not about taking winners and you can do some real damage when you

profit with poor logic.

It’s about being able to assess a situation, what is more likely to happen next and apply a strategy properly and consistently where

appropriate.

If your reasoning is sound and you take your trade, you have done the right thing in spite of the outcome of the individual trade. You have identified

your edge and given it the opportunity to play out in the market.

But if being right is about taking a trade and not the outcome then surely you can still be wrong? Of course. The

point is that if you view it this way, your focus is on trading properly. You

can never be wrong about the outcome because you know it’s

uncertain.

In order to give yourself the best possible chance of assessing an opportunity correctly

and executing your strategy consistently there are a few simple (but uncertain – there’s no concrete right or wrong) steps you can take.

You need a clear and simple enough plan of how

you will trade and under what circumstances, leaving the level of discretion to a minimum.

By monitoring market conditions (for example, as simple as whether the market is trending or consolidating)

you can understand when the strategy is likely to work better and therefore

what you should be looking for leading up to a trade.

If you have a strategy that has a genuine edge in the market, the most important step to success is being able to execute it effectively and eliminate

trading errors. These errors often stem from the strong emotions that come

with being made to feel silly

and can be averted by changing your mindset on what being right or wrong is all about. Change yours and never

be wrong again ;)