Right and wrong are actually poor terms to use when discussing analysis. Everything is of course “probabilities”. More correctly we should possibly refer to our ability to make positive or negative expectancy decisions and whether not the outcome falls in our favour. But I assume you know what I mean. So let’s go…

You WILL be wrong.

Not always, I hope.

But there WILL be times when you misread the situation and make an analysis or market bias call that just doesn’t play out as expected. You expect a certain market movement and it just… doesn’t.

There will even be times when you made the right call, assessing the higher probability outcome, but subsequent data and fate conspire to ensure that this time the market movement falls on the other side of the equation. Right… but wrong!

You have three ways to play this.

(1) Refuse to see it, refuse to accept it, and fight it with everything you have.

(2) See it but struggle to accept it, and let “being wrong” impair your mindset and negatively influence further analysis and trade decisions.

(3) See it, accept it, and ADJUST.

The first option destroys traders. You see it discussed from time to time when traders blow out an account.

But the second option is not so often discussed, despite being a far more common outcome. So many traders struggle with the idea of being wrong, as if making an analysis call in an uncertain, probabilistic environment should somehow be a defining factor in their self-worth.

And yet it’s the third option that is the one required for success.

When wrong, ADJUST.

See it. Accept it. And reassess; standing aside if you need to wait for more information, or realigning with the new market direction if conditions have changed.

If you struggle with this, there may be value in adding a section to your post-session review to track your performance and drive new growth as a trader.

When faced with a situation where market expectations did not play out as anticipated, (a) how quickly did you recognise and accept this, (b) how well did you adjust, and (c) what can you learn from this to ensure you do better next time?

Tuesday… I expected that a break of Monday’s low could drive price lower. A bearish momentum drive with potential to carry through to a full down trend day. I was wrong. But I adjusted.

<image: When Wrong, Adjust>

<image: When Wrong, Adjust>

Let’s drop down to the daily now and step forward a day with Monday having played out. This is the situation that now presented itself to us, using a post that was sent out to social media before Tuesday’s open.

<image: When Wrong, Adjust>

And to clarify my expectations going into the session… this is the 30 minute chart. (Noting that prior charts were 24 hour data but this one is RTH only. It fits better and although the levels vary slightly the concept remains the same.)

<image: When Wrong, Adjust>

<image: When Wrong, Adjust>

<image: When Wrong, Adjust>

<image: When Wrong, Adjust>

When faced with a situation where market expectations did not play out as anticipated, (a) how quickly did you recognise and accept this, (b) how well did you adjust, and (c) what can you learn from this to ensure you do better next time?

By all means, study the markets to improve your skill at analysis.

But alongside this, work to get better at recognising when you’re wrong and adjusting. A different skill. Arguably the more important of the two.

Happy trading,

Lance Beggs

 


 

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