Ask yourself three questions:
- Would you rather be right or wrong?
- Would you rather be rich or poor?
- Would you rather be rich and wrong or poor and right?
The first two questions are simple: most people would rather be right than wrong, and most people would rather be rich than poor.
The last question is where it gets tricky. My experience is that most people, if they are actually honest with themselves, would actually choose being right over being rich.
I think this is why: from an early age, we are taught that being successful is highly correlated with being correct. When a child gets 85% on a test, they are asked what went wrong with the other 15%. When they get asked a question, giving the correct answer is praised and rewarded. This attitude applies from Kindergarten to College and on into the workplace.
For most professions, the correlation between being successful and being correct still applies. For example, I think that my doctor is a good doctor because he gets his diagnosis correct; I think my waiter is a good waiter because he gets my order correct.
Within a trading organization, this rule still holds: I think my trade analyst is a good trade analyst because she analyses market fundamentals correctly; I think my salesman is a good salesman because he generates customer business correctly.
But trading is different. In trading, you are successful if you make money, and making money is not necessarily about being correct.
A few examples:
- You can correctly call the fundamentals, but the market might not reward you within the time-frame of your trade.
- You could correctly call the market direction, but apply your view using the wrong instrument.
- You could correctly call the market direction, but be stopped out before the trend goes your way.
In trading, you can be correct in many ways and still lose money. It happens all the time, and it sucks. Even worse, the lazy idiot who sits next to you can be wrong and still make money.
Most people find this hard to deal with. Most focus on being right, not on making money. Funnily enough, this is especially true for high achievers who tend to be the ones who either get recruited to be professional traders or who make enough money in another field and try their hand at trading. The classic of the genre is the doctor or dentist: after years of being indoctrinated that only 90% and above counts as success, they struggle in a trading job where making the most money might require them to be right only 60%, or 51% or 30% of the time.
If you want to be a successful trader, you need to be honest with yourself about whether you want to make money, or if you want to be right.