Adopting a flexible mindset is absolutely crucial in our learning journey as traders. Traders who are "wishy-washy" tends to better than traders who are too rigid and fixated towards their trades.
Let's do a case study and go back to Oct 2010 where price action for BAC was at the $13 support level. Here's the story: Trader A and B both planned to initiate a long position at the $13 level as the general market condition was good. The Dow Jones index was also rising. Thinking that the $13 support would hold, Trader A initiated a long trade in BAC at $13. Lo and behold, BAC began to break through the $13 support. Trader A was so fixated in his thoughts on his long trade and refused to believe the fact that he was wrong and began to average down instead of cutting his losses at his pre-determined stop loss price of $12.95.
On the contrary, Trader B was flexible in his thoughts and had adopted a "I am going to be wrong most of the time" mentality and had a plan in place for the different possible scenarios. Instead of being over fixated on his long bias when the market broke through $12.95 taking out his stops, he understood that the market was telling him that he was on the wrong side of the trade and Trader B immediately changed sides and started shorting BAC as the stock price eventually went down to as low as $12.15.
Trader A fought the market all the way down and refuse to believe that he was wrong while Trader B embraced uncertainly and risk by adopting a flexible mindset which allowed him to turn a losing trade into a totally new market opportunity/trade and most importantly, ended up in the green. I am sure many of us here have faced such situations before. Instead of moaning about such trades, we might as well be mentally prepared for the different scenarios which could possibly take place before placing our trades and also respecting what the market is trying to tell us instead of fighting the tape.
Remember my friends, the market is never wrong!
Let's do a case study and go back to Oct 2010 where price action for BAC was at the $13 support level. Here's the story: Trader A and B both planned to initiate a long position at the $13 level as the general market condition was good. The Dow Jones index was also rising. Thinking that the $13 support would hold, Trader A initiated a long trade in BAC at $13. Lo and behold, BAC began to break through the $13 support. Trader A was so fixated in his thoughts on his long trade and refused to believe the fact that he was wrong and began to average down instead of cutting his losses at his pre-determined stop loss price of $12.95.
On the contrary, Trader B was flexible in his thoughts and had adopted a "I am going to be wrong most of the time" mentality and had a plan in place for the different possible scenarios. Instead of being over fixated on his long bias when the market broke through $12.95 taking out his stops, he understood that the market was telling him that he was on the wrong side of the trade and Trader B immediately changed sides and started shorting BAC as the stock price eventually went down to as low as $12.15.
Trader A fought the market all the way down and refuse to believe that he was wrong while Trader B embraced uncertainly and risk by adopting a flexible mindset which allowed him to turn a losing trade into a totally new market opportunity/trade and most importantly, ended up in the green. I am sure many of us here have faced such situations before. Instead of moaning about such trades, we might as well be mentally prepared for the different scenarios which could possibly take place before placing our trades and also respecting what the market is trying to tell us instead of fighting the tape.
Remember my friends, the market is never wrong!
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