#TradingInsights: What Value is it to be Right?

As a healthcare practitioner, I have been exposed to an industry where being “right” was a norm. In fact, it has become a rivalry of ideas where you have to prove yourself “right” before anyone else listens to you. This practice ranges from the clinical decision making such as deciding the most appropriate care regimen for a patient needing care to the administrative and support processes throughout the organization such as strategies on how to slow down the turn over of nurses in a facility that is at the brink of shutting down as manpower falls down the needed minimum operational requirements. More interestingly, the idea of being “right” can easily be swayed not by meritocracy, but with how many titles you have after your name, the number lingering your work experience, and/or the seniority and power heirarchy you have dominance in the organization. Similarly, I have observed that trading communities have been vulnerable to the same dilemma. While the “mentors and gurus” easily preach about being humbled by the market, they celebrate successes by posting portfolio screenshots as if gaining profit was the antithesis of cutting losses in a well-planned trade. Similarly, establishing criteria of profits more than 100% in a year further establishes their notion that those who gain profits are “right” while those who gain any less than that is not worthy of being “right”. Thus, I pose this very question: What value is it to be right?

I will try to elaborate some of the lessons I learned as a result of my trade with FNMAS. As a point of perspective, we were still not taught the trading set-ups during this time, and I was merely using knowledge prior to my entry at Caylum Trading Institute.

1. Assume you are right, and reality will hit back right at you.

One of the greatest blunders I had to learn through the hard way was preparing well enough to place the right order types in the broker interface. As US Equity Markets allow both long and short order types, I should have exhausted asking the questions instead of assuming that by listening to the basics, I know how to do it right. During my first attempt, I placed an order and ended up having shorting this issue with the intention of maintaining a long position. This event forced me to set a buy order to cover for the short positions.

To make things even worse, I repeated another mistake on the same day. This time, I was successful in placing a long position and is now looking to set the target price when to take profits. However, I selected the wrong order type and my sell order got filled-up almost immediately. This event got me entirely out of the stock.

Correction: Establish an algorithm of orders for long and short positions.

Corrective Action: Ensure that each trade follows the algorithm, placed first on save option, reviewed for accuracy of entries, and finally submitted to set the orders.

2. Be right at hindsight, and you will be placed rightfully behind.

Like most traders, I am also vulnerable to think (at the time of this trade) that I was right. Lo and behold, the stock did indeed go up as a result of the scenario I was expecting for this stock. The only problem was I stayed on believing that I was right all along, yet failed to keep an open and cleared state of mind to see that price action over the next three days after the break of resistance was already quieting down. In the end, I was rightfully left behind as I looked away from this stock with the mindset that I was right about my scenario projections for this stock after getting emotionally damaged with the unintended trade executions I committed.

Correction: I take time to look over formations of the stocks I have made mistakes and I am intended to include in my watchlist.

Corrective Action: I try my best to share with my coach and group about the trade ideas that i have to validate the formations that I think I am seeing, and ensure that corrective actions for my first mistake are applied in every placed order.

At this stage of my trading journey, I learn valuable lessons on properly executing the trades that I wish to enter. Likewise, bad trades are not those ones that you have properly executed despite cutting your losses and ending up with the negative portfolio after following your set trading rules (i.e. Entry, Exit, Cut Loss Point, VAR = preferably 0.5% of total port for beginners, etc). Bad trades are those trades that you have no idea how you executed them and why they ended up with either a profit or a loss and fails to replicate any further in the future as they are not purposeful nor meaningful. Thus, by acknowledging and reflecting on why you entered a trade, you learn one additional way of how NOT to execute a trade. There is still no need for you to be right, but it is more important for you to remember your failures and establish a system that will refrain you from committing them again in the future.