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Can You Admit When You Are Wrong?
Admitting you are wrong is not admitting defeat. But many traders and investors let their ego get in the way and that leads to a calamitous road. I have seen more train wrecks by option and stock traders happen because a lack of focus, humility and the need to be right at all times. Traders holding on too long until a position becomes a disaster, or buying more when clearly they cannot admit a mistake was made. Time, of course – is the great equalizer of a mistake, the perception that we can wait out a mistake for as long as possible until finally proven correct. But the future is always uncertain.
There are opportunity costs involved here, and those costs could be high if we continue to dwell on a trade gone bad. Trading is not a game of perfect, especially options trading – where not only must you get it right with direction but also in time (an options trader can make a great living being wrong even half the time). What can we do to avoid falling into a narcissistic frame of mind? Do something most cannot do – admit you are wrong and move on.
Last week we booked many trades in the explosive options service, and some were very nice gains. It feels great when a plan comes together and our accounts grow. However, we also lost on some trades too, and they certainly brought us down to earth. I chose to let everyone see these losses, certainly nothing to be proud of, rather to show the reality of options trading – that while we offer a service for those who want to grow their accounts it is important to show both sides of the results ledger. Believe me, if all we ever did was post losers then I would certainly be looking for another profession.
It’s easy to talk about the winners, but we choose to show all the results. I received some nice comments over twitter from viewers praising us for mentioning the losing trades, saying few ever admit to it in public. The emotions run high during the trading day as we strive for wins. We feel bold and daring with a few wins under our belt and will venture out on the risk curve time and again, only to get bit by a loss or two.
This may set us back emotionally. It happens, but we have to deal with it and just move on. For me, it’s cathartic to think about it ONE time and just get over it; moving onto the next trade. It’s much easier to deal with being wrong and going forward, our heads are clear and we’re focused and what is in front of us. For many it is not that easy, which is where the ego gets in the way. We are talking about trading here, not a life/death situation. I promise nobody gets hurt if you admit you were wrong on a trade. However, you might be better off and that next trade might be a winner.