In trading perspective being right always involves emotional decision making like overtrading, revenge trading, fomo trading etc. Meanwhile every new trader in the market tries to be right every time. Because they can’t handle the pain of being wrong. That’s one of the major reasons why the profits remains away from them. Because being every time right doesn’t bring you the from market. But doing what it requires to make money can bring the profits from the markets. Because profit doesn’t require you need to be right every time but it needs 1 trade which aligns to your trading rules and conditions.
However it isn’t guarantee you to bring the profits but this one of my ways of how pro traders make profits by being disciplined all the time.
What Does Being Right Mean in Trading?
Being right in trading is predicting in which direction the market is going to move. However sometimes they predict right but many time their prediction isn’t right. Meanwhile they struggle to bear the pain of being wrong because they are so much attached to being the right in the market every time. Rather aiming for the better execution they aim for the being right by overtrading and all.
The Cage Of Perfection: Every novice trader believes that in order to become the profitable trader you need to win the every trade. But in reality t all depends on the risk to reward ratio. For example if your strategy win rate is 40% but whenever you are winning, you make returns 2 or 3x more the what you have lose. That’s what successful trading requires.
Process Of The Profitable Trade: Always look or wait for the high probability setup to trade. Because in the percentage ratio the high chances of the trade may work well is only at the high probability setup. However this process includes the defining the loss before entering into the trade. Basically it tells you when to exit in loss and when to exit winning from the winning position.
Why Being Right Does Not Guarantee Profitability
In general right is always associated with success, abdunance and etc. But here in trading everything is opposite, being right is most of time leads to the wrong decisions. The profitability doesn’t require to being right every time but it requires managing the risks, set the stop loss and target price in the trade. And making the probabilistic decisions over the series of the trade.
What Involves In Being Right
Avoid Accepting The Losses: When the traders are attached to the outcome of the trade, they refuses to accept it. Because they connect trading to real life aspects which made them if i accept it i won’t be able to get succeeded in the markets. Just to feel right every time they engage with overtrading and seeks for the validation of being right until trading capital wipes out.
Shifting The Stop Losses: In the fear of losing the trade traders often shifts the stop loss as they are afraid to take the loss and the pain of being wrong.
Staying In The Losing Position: In the view of avoiding the loss in the trade, most of the time traders hold the losing position, hoping for the reversal in the trade.
Practical Ways to Stop Needing to Be Right
In order to avoid being right in the market, traders must learn to treat it like a business rather than quick profit generating system. To overcome this traders need to follow the strict risk management, entry exit plans and stop loss. Aim to execute the trade fearlessly with all check list to be ticked before the entry into the trade.
Here are some practical ways to avoid being right.
Accept Losses as “Business Expenses”: Pro traders consider the loss as the part of the process just like business expense. When the market is trading near by to your stop loss. Stop shifting your stop loss in the hope of the reversal. Once the market tapped the stop loss just take it as the cost of the setup.
Treat Setups as Hypotheses, Not Guarantees: The market doesn’t move according to anyone, it only moves where is is the supply, demand or liquidity is present. Meanwhile your setup have any of these present then the market may react to that levels. Otherwise the markets will surpass your setup.
Pre Defined Entry & Exits: Always enters in the trade with pre set entry and exits rules. It’s like telling the markets this much i want to earn on the x amount of risk. If the market gave you target price in this trade and you entered into the next trade then eventually it will reduce your profits. If the market too the sl in your, by jumping into the next will double you loses. After the results of the trade just close your setup walk away from the screens.
Trade Small to Prove Your Process: Always risk a small amount of the trading capital in order to avoid being right in the markets. Trade with the smaller position sizing in the initial phase of the trading career. Because it will make you use to the trading environment. And once you are comfortable you can increase the lot sizing.
Shift Your Reward System: From judging your trading skills based on the p&l to shift your judgement to the process based trading. If you followed all your trading rules, risk management etc. Then whatever the outcome will be you had a successful day in the markets.
Long-Term Success Is Built on Good Decisions
Long term success in trading built on the uncountable good decisions behind the trades. Avoiding all the market noises, staying disciplined throughout the time, trades with proper risk management and etc. Meanwhile this success is based on the repeating same process, sitting in front of the screen until the trading hours ends. However this still doesn’t guarantee you the profits in the while executing the trade.
Following The Plan: Sticking up to a strict trading plan will protect you from the emotional trading, overtrading, revenge trading etc. Always use the common risk management concept to protect the trading account like 2% per intraday trade risk, 4% per swing trade risk etc.
Consistency Over Dopamine: Rather than running behind the quick profits, aim to wait for the setup patiently. When the market approaches that level just execute the trade fearlessly while following all the trading rules. Meanwhile sometimes the market are choppy or trading in consolidation. It’s better to do nothing in that type of market because in trading sometime doing nothing is better than doing something.
Conduct Trades Review: Maintaining the trading journal and tracking all the mistakes and the trades honestly. Will push you ahead from the thousand of novice traders. Reviewing all the trade weekly or bi weekly will give you idea, in which corner of your trading requires improvisation.
Final Views
One of the major concepts in trading is if you want to make money from the market the avoid being right. Because it create egoistic mindset which doesn’t accept losses and doesn’t bear the pain of being wrong. The market rewards to those who accepts the mistakes and adapt to the environment asap.
Focus on being the process driven trader instead of someone who tries to be right every time. Because being right will always force you to the keep trading until you feel right. But being a process driven will force you follow the process in every market condition.
Check out my previous blog on Probability Theory In Markets