Dancing on the Fine Line

Sean McLaughlin
February 28, 2024

What if I’m wrong?

I get ideas. Sometimes crazy ones.

I see something in the charts, or read something in the news, or listen to something on spaces and it triggers me into taking action.

Sometimes I’ll take aggressive actions because this idea I have – wherever it came from – is something I feel strongly about. I feel that the odds are heavily stacked in my favor. Or perhaps the payoff, if I’m right, can be so overwhelmingly profitable that it’s impossible to ignore.

We all have these feels about certain trades we’re in from time to time, right?

We get excited. We get optimistic. We start counting our winnings before they’ve even hit our account. It becomes impossible not to daydream.

There’s nothing wrong with any of this.

But what if I’m wrong?

What if I am blind to something so obvious that invalidates my thesis? Or what if the market simply disagrees with me? What next?

Our ego might take a punch. It’s fine if the damage is limited to just that. We can recover from a bruised ego.

But if my trading capital becomes impaired by my being wrong, that’s a very big problem. That’s a problem I need to try to avoid at all costs.

There is a school of thought out there that to be successful, we need to occasionally take bigger risks up to the point that it makes us a bit uncomfortable. I agree to an extent. But it’s a very fine line between uncomfortable and irresponsible.

Do you know where that line is for you?

Be mindful of where you are.

When I start getting uncomfortable with my open risk, I try to ask myself if I’m just getting nervous because the risk is getting larger than I’m used to? Or is it because my unconscious intuition is trying to tell me I’m over the line and I ought to be on high alert to dial my risk back quickly?

Ask the question, and listen for the answer.

Trade 'em Well,

Sean McLaughlin
Chief Options Strategist
All Star Charts, Technical Analysis Research

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