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So did you get it right?

Did you get it right? This is an important question for new and seasoned traders to think about – but there is a problem with it. So you made your best risk assessment, decided your entry point and stop-loss and you entered the trade. What happens next?

Many a new trader would spend some time looking at price movement shortly after. There’s a ‘Yes!!‘ sort of feeling if early on price moves into positive equity – but there’s a scratching of the head associated with doubt, and ‘coulda-woulda-shoulda‘ if price moves against the entry position. Doubt sets in if it’s going ‘wrong‘. Many a trader – and I’ve been there – wonders, “Have I got it right?” Well, being right is a very nice feeling, especially as in this business being right means more dosh. It’s human – it’s what we are about.

Our hard-wired psychology favours positive ‘reward’. If we do something that brings a benefit and we feel good, our nature is to think we were right. So, there is a constant yearning for ‘reward’ and being ‘right’. But in this business we are engaging a system that will  prove us wrong about about 60-80% of the time (for new traders) and about 50-60% of the time for seasoned traders. If price moves against an entry position, the deepest recesses of our being takes hold of our minds and says (or feels), “Something is wrong!” Then another urge arises to, “Do something to correct the wrong.” Dealing with this is not easy – and this is about the thing they can’t teach you on a course. In fact nobody can give you the means to cope with any of this. ‘They’ may counsel, they may advise but that does not mean that you’re gonna get it.

Getting it ‘right’ and winning ‘a trade’ or a series of trades, leads us also to think/feel we have done something that we should repeat in the future. Plainly, this is our reward system bending our minds. Seasoned traders will know this trap. The reality is that a string of successes means very little.

Expert traders come to their confidence after careful assessment of hundreds of trades, mathematical assessment by way of the ‘expectancy ratio’, and understanding their own percentage loss rate. The experts are hardly ever moved by being ‘right’ – or  ‘wrong’. Some say they’ve developed ‘nerves of steel‘. This is more about the ‘right’ mindset and a system of cognitive and behavioural operations, that overall produce positive gains over long periods of time.

Conclusions

  1. Skill in trading – the kind that makes for profitability – is not about getting it right.
  2. It is about managing the risk involved in getting it wrong, and any factor that leads us to not managing risk properly.
  3. Aiming to be right in this business is a recipe for failure.
  4. Know your enemies! Manage them.

DISCLAIMER:
The information provided herein is opinion only. Under no circumstances do any statements here represent a recommendation to buy or sell securities or make any kind of investment. You are responsible for your own due diligence. To summarise, we do not provide investment advice, nor do we make any claims or promises that any information here will lead to a profit, loss, or any other result. All materials are for educational purposes only. We are clear in our SYP.

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