In Continuation with Previous Article
WISHING, HOPING, AND PRAYING
Actively managing trades is essential in trading. Wishing, hoping, and praying, while normal in other aspects of life, have no place in trading. When we engage in these passive behaviors, we relinquish control and responsibility to the market, hindering our ability to make informed decisions and act in our best interest.
Our opinions about the market may not always align with reality, and clinging to them through wishful thinking can lead to detrimental outcomes. It’s crucial to recognize when we’re caught in this cycle and exit positions for reevaluation. Although it’s easy to fall into the trap of wishing and hoping, especially for new traders, it’s a mistake that must be avoided at all costs.
Intuition, often confused with wishing and hoping, can guide us effectively if we clear our minds of biases and confront situations head-on. True intuitive impulses lead us to take the most appropriate actions, free from the influence of passive wishes and hopes. Trusting intuition requires actively addressing issues and being prepared to seize opportunities, rather than passively waiting for the market to conform to our desires.
Ultimately, trading success lies in our ability to act decisively, adapt to changing market conditions, and let go of passive behaviors that undermine our progress. Instead of wishing and hoping for specific market movements, we must focus on managing risk, making informed decisions, and staying attuned to genuine intuitive signals that guide us toward profitable opportunities.
In The Disciplined Trader, Mark Douglas explains it very clearly:
“However, there is another less obvious problem with avoidance, especially with respect to wishing and hoping. A true intuitive impulse – a deeper level of knowledge and wisdom that will indicate the next most appropriate step to take – that will always be in our best interest feels very much like wishing and hoping. In other words, it is very difficult to distinguish between the two, making it very easy to mix them up, which is one of the reasons why we find it so difficult to trust our intuition. The way you can know for sure that you are getting a true intuitive impulse is to clear out of your mental environment anything that would cause you to wish and hope that something will happen instead of confronting the issue head on to find out what needs to be done. You can wish and hope that the market will come back, or you can cut your loss and make yourself ready to take the next opportunity requires that you change anything in your mental environment that would cause you to avoid confrontation and consequently wish and hope. The less cause you have for wishing and hoping that something will happen, the more you will know that when you get that certain feeling, it is a true intuitive impulse, and the more confidence you will have to follow it. Intuition will always guide you in the most appropriate way to fulfill your needs.”
You can wish and hope that the market will come back, or you can cut your loss and make yourself ready to take the next opportunity.
DOUBLING UP: ADDING TO A LOSING POSITION
Minimizing risk is paramount in trading, even more critical than finding winning trades. Yet, many traders fall into the habit of adding to losing positions, a practice that significantly increases risk. This behavior often stems from the reluctance to admit being wrong. By doubling down on a losing trade, traders seek to avoid accepting their initial error.
However, adding to losing positions contradicts the principle of minimizing risk. It can lead to dangerous situations where a temporary success validates this risky behavior, reinforcing the belief that it’s acceptable. Yet, the next attempt could result in substantial losses. The decision to enter a trade should be based on identifying opportunities and assessing the market’s potential direction, not on averting admission of error.
While scaling into a position with a predefined plan can be a valid strategy, haphazardly adding to a losing position is a mistake. Success in trading requires acknowledging mistakes rather than avoiding them. Adding to winning positions, on the other hand, can be beneficial and is aligned with acting in one’s best interest. This underscores the importance of adhering to sound principles and strategies that prioritize risk management and objective decision-making.