Novice traders often grapple with an unrelenting desire to be right in their trades. This deep-seated need can lead them down a path of unproductive behaviors, hindering their growth as traders. In this article, we delve into the reasons behind this compulsion and explore how embracing criticism can pave the way to trading success.
The Paralyzing Need to Be Right
New traders frequently struggle with the compulsion to be right. This need is often rooted in ego, and it can plague a developing trader and lengthen the learning curve substantially. The desire to be right is so potent that it drives them to engage in counterproductive trading behaviors as they strive to avoid admitting their mistakes. For instance, they might cling to losing trades in the hopes of keeping losses theoretical - “It’s not a loss until you close!” Have you ever heard this statement? It’s usually murmured from the failing trader. Alternatively, they may procrastinate or avoid executing trades to evade the repercussions of a flawed trading idea. Even worse, developing traders will cling to their thesis so tightly that they average down and over-leverage. Have you ever thought to yourself, “I’ll just add a few more lots here and when it hits breakeven I’ll exit”? If so, you have likely struggled with the need to be right.
This constant need to be right can stifle a trader's creativity and freedom. When the fear of being wrong inhibits one, they tend to freeze at critical moments during a trade. This inhibition can lead to hesitation and a reluctance to execute trades. Unfortunately, without a consistent series of trades, traders cannot sharpen their skills or truly master the markets. Embracing feedback and criticism is pivotal for trading success. Unsurprisingly, the mental clarity comes when the loss is fully accepted and you can move on to that next trade - Without the mental baggage.
Understanding the Resistance to Criticism
Why is it so challenging to accept criticism, whether it comes from others or the market itself? The resistance to criticism often stems from associating it with feelings of inadequacy. We tend to attach immense psychological significance to critical remarks and negative feedback. Developing traders will often tie their self-worth to the profit/loss number for the day. It feels as though we are being morally chastised, much like a parent or teacher reprimanding us. This, however, is a fallacy. Criticism doesn't carry emotional weight; it's simply feedback. Viewing it as impartial data is essential to refine your trading skills. Anytime you take a loss, that is simply the market providing you with feedback for your thesis.
Another reason we struggle with criticism is an irrational need for perfection. We mistakenly believe that we cannot achieve success unless we are always right. This mindset often originates from our experiences in education, where retaking tests or revising term papers were typically disallowed. This approach doesn't need to carry over into trading. By engaging in small practice trades plus reviewing and documenting, you can learn from your mistakes, improve, and try again. Risk management ensures that mistakes are part of the learning process, rather than a threat to your trading account or financial security.
Embracing Criticism as a Path to Success
To succeed in trading, we should actively seek out criticism. Whether it comes from actual trades or consultations with a trading coach, the more information we gather about our performance, the better equipped we are to refine our skills. There's no need to avoid criticism or fear acknowledging our limitations. By confronting criticism head-on, we can hone our trading abilities and navigate the markets skillfully and profitably.
In conclusion, the need to be right can hinder novice traders, preventing them from growing and excelling in the trading world. Embracing criticism and feedback, devoid of emotional baggage, is essential to becoming a successful trader. By understanding that perfection is not a requirement and that mistakes are stepping stones to success, traders can unlock their true potential and achieve profitability in the markets.