I have no problem saying that, although, in the past my tendency to bring attention to bad calls has proven unpopular with publishers, editors and other writers. They believed that bad calls are a fact of life when you give an opinion and, as everyone is aware of that, they can safely be ignored.
To me, though, that is exactly why they cannot.
Whether you trade in the short-term or invest for the long-term there will be times when things just don’t pan out how you envisaged. What matters is that you recognize it, own it, and do something about it. How can I give that advice to people, then attempt to gloss over my own bad calls?
If you do it, then even when your base case for a commodity, stock or whatever is proven wrong, it doesn’t cost you that much. I have said before that discipline is the key to longevity in trading, and this is a good example of why. If you agreed with me last week and decided to short crude, but also followed my basic advice to always set and stick to a stop loss order when initiating a trade, you would have taken a small, manageable loss, then re-evaluated.
When you did that, you might have tried again and taken another small loss, or you might have reversed your view and made money on the rest of the move. Or you might have found yourself unsure and just sat it out for a while. Any of those, though, would enable you to live to fight another day.
The worst thing you could have done, although completely understandable, would have been to ignore the bad news, hang on, and hope it came back. It is understandable because it is human nature to some extent. None of us likes to admit that we were wrong, and we are wired and encouraged to ignore bad news and focus on the good.
To survive and prosper as a trader, however, you have to cut your losses and run your profits. That means doing the exact opposite of what comes naturally, resisting the temptation to ignore a market move against you, and not immediately booking a profit when one is available.
