Accept being wrong in order to be right….

Many traders spend an inordinate amount of time trying to avoid being wrong (having losing trades). They’re obsessed about being right and having high win rate strategies or systems. You can hardly blame them with all the nonsense out on the web about having high win rates.

The problem is these people become fodder for the market because this type of thinking is very dangerous. Wanting to be right as often as possible leads traders into having ultra wide stops or not using stops at all. It also encourages revenge trading after having taken a few losers plus it breeds over gearing – the need to make back losses.

As floored humans, we all have it hard wired into our DNA that we should be right as much as possible. We are taught from infant that being wrong is bad and this follows us throughout our education and spills over into our careers as an adult. So when we first get into trading, it’s counter-intuitive for us to immediately accept that we are going to be wrong 40% or 50% of the time. No wonder so many new traders give up!

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So what’s a trader to do? Spend less time looking for the holy grail strategy or system and more time developing your trader mindset. I can tell you right now that I’ve been involved with traders of all types over the years; I’ve trained new traders; I’ve traded for funds; I have professional traders as friends and I’ve also seen every trick in the book that guru’s pull.

The very best traders out of all of them have never been those with the hottest strategy. Don’t get me wrong, I’ve seen traders pull off some amazing results over short periods, but the best traders were those not with the best strategy, but with the best mindset. They’re able to adapt to an ever evolving market and accept that they will have losing periods. I always remember an ex-market maker turned money manager say to me, ‘my job is not to purely chase performance, once I have made my targets, I spend the rest of the year defending the profits I’ve made’.

In order to develop as traders, we have to accept having losses. Once we can do that, we can transcend to the next level and realise that we can only control the controllables, the rest we needn’t exert to much effort worrying about….

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Today’s chart is that of EUR/GBP. It’s had a great run of late but I’m seeing a developing divergence looking at the MACD. So for now, it looks like it could take a breather and pull back. A break of the trend line drawn would help confirm this situation.

Have a great week

Charlie Burton, Ezeetrader