Does Your Need to be Right Get in the Way of Making Money?

Does Your Need to be Right Get in the Way of Making Money?

By Andrew Menaker, PhD

www.andrewmenaker.com

We come to trading to make money. We may have an edge and a plan. And we certainly have hopes. But what happens?

As a performance coach for traders, here are statements I frequently hear from traders who are not satisfied with their performance: 

“My need to be right is so strong that I have a hard time accepting a losing trade, so I end up taking a much bigger loss instead of just moving on.”

“My need to be right is so strong that I don’t take trades and I miss out on making money all the time.”

“I get nervous that the trade won’t work so I get out and then watch it go without me.”

With money on the line, no one wants to be wrong. Although we’re told to not get emotional and simply follow the plan, our need to be right is very strong and seems to never dissipate. 

We can’t control whether the trade will work or not. Once we put the trade on, it’s up to the market to decide what happens. And even knowing this, our own personal need to be right will still get in the way. 

Besides hoping, there is something else we can do.

We can focus on what we can control. Otherwise, it’s too easy to let our own personal need to be right become the arbiter of the trade.  

A solution to this need-to-be-right issue is to focus exactly on what we can control. Our decision-making process. We never know if the market will agree or not, so all we can do is focus on the quality of our decision-making. 

This is bigger than you may think. As a performance coach working with successful professional traders and investors, they know they can’t control the outcome, so they focus on the quality of their decision-making process. 

Here’s one way to apply this to your trading. When you evaluate your trading, instead of looking only at your P&L and various outcome trading stats like win/loss rate, avg gain/loss, etc. there’s another aspect of your trading that needs to be evaluated. 

What was the quality of my decision-making? There are many ways to evaluate this. Three simple examples: Did I enter the trade when I planned to?  Did I size the trade according to my plan?  Did I exit the trade according to my plan? Those are three critical aspects of your trading, and all three are absolutely in your control. 

Regularly evaluating the parts of your trading that you control is one the most powerful ways to shift the focus from the need to be right. 

Andrew Menaker Ph.D. is a trading psychologist; you can read more about him at http://www.andrewmenaker.com