If there is one thing I want people to take away from all these years of writing about markets, it’s an acceptance of the fact that you do NOT have to get every trade right.

New traders have this incredible need to be right. I know because I was there myself once. And because I have a LOT of contact with new traders where this problem is very evident.

It’s a dangerous belief.

And it needs to be fixed.

Because you cannot progress until you are ok with losses. And more importantly, ok with being wrong.

Here’s an excerpt from a reply to a blog post comment during the week. The sequence being discussed is not important. This happens over and over again.

<image: I get MANY trades wrong. It's part of the game.>

This trader is new to the game. But really enthusiastic. I have high hopes that he will do well.

But this will require a shift in mindset. Away from the need to be right. Away from seeking certainty in the markets. And instead towards managing risk and seeking to profit over a SERIES OF TRADES.

So here’s a fact…

I AM WRONG A LOT.

By “wrong” I don’t necessarily mean losses, although that is often the case. Rather it means that hindsight will show that my analysis or trade idea was not properly aligned with the reality of the market.

Let’s look at a sequence of trades, involving three that were “wrong” before I finally got one “right”.

<image: I get MANY trades wrong. It's part of the game.>

<image: I get MANY trades wrong. It's part of the game.>

<image: I get MANY trades wrong. It's part of the game.>

<image: I get MANY trades wrong. It's part of the game.>

<image: I get MANY trades wrong. It's part of the game.>

<image: I get MANY trades wrong. It's part of the game.>

<image: I get MANY trades wrong. It's part of the game.>

<image: I get MANY trades wrong. It's part of the game.>

<image: I get MANY trades wrong. It's part of the game.>

<image: I get MANY trades wrong. It's part of the game.>

<image: I get MANY trades wrong. It's part of the game.>

<image: I get MANY trades wrong. It's part of the game.>

<image: I get MANY trades wrong. It's part of the game.>

See here for the method used for forward projection and identification of potential BPB, BOF & CPB setups.

The key takeaways:

  1. You won’t always get it right. Sometimes your trade idea is wrong. Sometimes your timing is out. Sometimes you just screw up the execution!
  2. Good entry location and good active trade management can ensure that even when you get it wrong, you still don’t lose much. Or, as in this sequence, you don’t lose anything.
  3. One right trade can more than make up for numerous wrong trades.
  4. Profits come from a series of trades. Not from individual trades. In this business, individual trade results are irrelevant (assuming they do not break your money and risk management limits).

Maybe this pressure you feel to always get it right and to always win… is not necessary.

Maybe you can allow some imperfection and yet still achieve everything you want from this game.

Imagine this… what if you could be happy with a 50% win rate overall, seeking to profit from average winners being greater than average losers.

Think about it.

Happy trading,

Lance Beggs

PS. Previous article on the exact same theme – https://yourtradingcoach.com/trading-process-and-strategy/wrong-wrong-wrong-right/

 


 

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