Everyone comes to the forex market for a reason, ranging between solely for entertainment to becoming a professional trader. My experience tells me one of the biggest issues with Loss making traders have is the ever present ‘Need to be right’.
Why do we feel the need to always be right?
Being right is something we all find satisfying, we can’t deny that. It reinforces our self-esteem.
The need to always be right can be rooted in us from the Childhood
That need to be right may be a defense mechanism that helped that person survive whatever it is they experienced and was necessary for that time, but it’s destructive in any kind of healthy relationship.
Secondly, modern society tends to punish people who are not right, because so many things have turned into a pointless argument of “who’s right?”
One who obsesses over always being right ends up suffering two ruthless side effects: isolation and the loss of health.
One of the most important psychological characteristics of winning traders is the ability to accept
(2) the fact that you may well be wrong more often than you are right in initiating trades.
Small Story on Being Right
There was a day when two fisherman were navigating upstream when suddenly, they spotted a boat coming towards them from downstream. One of the elderly men tried to row to the edge thinking that it was an enemy boat. The other elderly man started to yell in a loud voice raising his paddle thinking that it was unwary and unexperienced fisherman.
The two fisherman began arguing with each other like small children in a school yard, until a few moments later, the boat that was going down stream hit them at full force launching them into the water. The two elderly men held onto pieces of floating wood and discovered that the other boat was empty. Neither of them was right. The real enemy was their own minds, two stubborn minds and eyes that could no longer see with the visual acuity of the old days.
Same Applies to Traders they know they are losing but EGO Do not allow them to cut the trade.
Winning traders understand that trade management is actually a more important skill than market analysis. What determines profits and losses is often not so much a matter of how or when you enter a trade, but much more a matter of how you manage a trade once you’re in it.
As you probably know by now the single biggest mistake a trader can make is to hold on to a losing position. Failing to cut losses quickly and letting them develop into huge losses is mentally and financially devastating. The underlying psychology which is responsible for this behavior is the ‘need to be right’ and the fear to sell at a loss.
How to stop needing to be right all the time:
1. Recognize that acceptance is not the same as weakness.
Accpet you will do mistakes and you will not be right all the time. Market is supreme and losses are just an OVERHEAD cost of trading just like any other business.
2. Start small.
Trade with small account till you have completely taken care of your emotional well being and comfortable in taking losses.
3. Ask the age-old question: Would you rather be right or make Money in Market ?
The most important rule of trading is to play good defense, not great offense. -Paul Tudor Jones