Being Wrong

Most people cannot handle being wrong period. That is why most people should not be trading. In trading, you have to be able to be humble and be wrong. If you cannot stand to be wrong, then you must not trade, as you'll lose your account.

Been there, done that, more than once. No thank you.

Yesterday I was talking to a broker and he was relaying what he saw some people do. They were way up in their position, didn't put any protective stops in place, and then went way down against them to end in a cost. He saw this over and over in people.

Do they not know about protective stops or taking profits off the table? Are they not paying attention to their position? Are they expecting some huge win fall? Are they ignorant? Were they being hopeful? Did they trade without a solid, written trading plan or any good, written strategies?

Honestly, from the time I entered the market in 1995 to 2005, I had never heard of protective stops or stops in general. I, like many people, hoped to make a killing in the market, which I did -- but gave it all back (more than once).

In late 2005, I got formal trading instruction where I learned about those stops, but it didn't really register until I really drew down my accounts big time. By the 2007/2008 timeframe, stops became more common, but the discipline to use them every single trade still eluded me.

Now, in 2010, they are very important to me. They protect my account from huge drawdowns or wiping out my account. In a typical trading day, whether using real funds or practice, about 80% of the trades go in my favor. The 20% that don't, is a part of my strategy that takes costs into account.

I do have written, detailed plan and strategies in place, but following them is still an issue at times. However, things like I used to hope, close my eyes and wish that that wasn't happening, now I just get out and chalk it up to being wrong and it was okay, as I got out before things got really ugly.

You have to look at how you do life -- do you ignore the truth? Are you afraid of the truth? This will really come to bite you in the butt. Take responsibility for where you are in life. Maybe for a bit it won't seem like things are getting better, but they do.

If you're wrong, close your trade ASAP.
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