You know there are actually people out there that believe you’re supposed to be right every time? You need to have conviction and an opinion on every stock and sector always, and you’re expected to be correct 100% of that time. And no if/then statements either. You’re supposed to jump in naked without any risk management procedures in place.
Come on guys. This market is not about being right. This is about making money. That is all that this is about. We all know that guy averaging down on a bad trade until he/she blows up. Then we never hear from that person again. Good. No discipline. Some people are so concerned about being right, that they forget that they’re only in this market in the first place to make money. You cannot forget that.
For the most part I get a lot of great feedback from readers and followers on Stocktwits and Twitter. On occasion I get the newbie that calls me out for not getting every single call right. I obviously don’t let it get to me because I understand it’s a part of what we do. But it is nice to know that there are still stubborn people out there that forget that this market is ONLY about making money, and not about being right.
You will be wrong. I promise. You should even expect to be wrong. The risk that we’re taking must be quantified and I have to be able to accept that loss before I even enter the trade. If it’s too much risk/money for me to lose, I simply will not enter the trade.
I know that on many occasions I will be wrong, so it’s just safer to assume that I’ll be. I know that I will be right sometimes. Everyone is right eventually. So I prefer to just let profits run in the right ones and instead focus the majority of my attention on the ones that I’m wrong on. It’s that risk management that helps to separate the men from the boys, if you will. And this process is something that I try to improve on every single day.
Market analysts and commentators get criticized all the time. Hey, “you said this”, or “you said to buy this”, or “sell this”. Right, but I also said that, “I only like it above X”. Or, “I’m seller unless it breaks above Y”. There is always an if/then statement, at least there is in my book. If you’re not setting risk parameters, then you’re welcoming the criticism. I’m not expert in TV punditry, far from it. But I do try my best to set risk parameters whenever I’m talking about positions that I like or that I’m in.
Why? Because I know that I will be wrong. I have no way of knowing when I will be right or when I’ll be wrong on any specific trade. It’s impossible for me to quantify. So I just assume that I’ll be wrong and let the amount of risk involved dictate the size of the position.
You don’t always have to be right. Don’t be stubborn. If you’re wrong, throw in the towel and move on.
You will be wrong. I promise.
So prepare yourself for it, both mentally and strategically.