Why is it important to be fallible as a trader?It is very common for beginner traders to resist in admitting their mistakes. Being right all the time doesn't always go hand-in-hand with making money. Successful traders can usually attribute the bulk of their success by knowing when they are right – and taking full advantage of maximizing their profits – AND knowing when they are wrong, and taking immediate action to minimize losses. Being able to overcome the psychological need to be right and admitting he/she is fallible is important to being a successful trader.
Tips on making sure you are being fallible as you trade
- Automate as much as possible. By this statement, I don't mean to have an auto trader place your trades. What I am referring to is to develop a consistent pattern, day in and day out, for your trading business. I've written several articles about the importance of a trading plan and keeping a trade journal. Being consistent in keeping to your plan, and maintaining your journal, can help remove some of the discretionary elements of your trading.
- Learn to admit you have made a mistake, and cut your losses quickly before they get out of hand. No human being is infallible, it's a fact. Being able to accept this fact and taking immediate action is the sign of a mature trader who admits he/she is fallible.
- Learn to understand yourself. Have a clear understanding of yourself. Knowing your own strengths and weaknesses can help you be a more successful trader. For example, you may be more consistently profitable with longer-term trades, rather than shorter-term weekly trades. You do not have to be able to trade every strategy that is out there; or try to make yourself “fit into” a particular market or trading style. Successful traders find the niche that suits their individual personality, risk tolerance, and overall trading goals.
- Learn from your results. No one has ever said that being successful as a trader comes easily and with little effort. Some traders will say that trading is the most difficult “job” they have ever had. Applying the knowledge gained from your past experiences in trading – wins and losses – will allow you to plan future trades that may have a greater probability of success.