Wrong Move, Smart Guy

• Posted by DynamicHedge
• on December 16th, 2010

The other day I mentioned a trade that I wasn’t taking, due to the short side of the spread breaking out to new 52 week highs.  Had I taken the trade, it would have worked out perfectly, taking no heat on the position, whatsoever.  I should have known this would happen when I embedded Kenny Roger’s “The Gambler” into the post like a smug dickhead.

When this happens your mind locks on to the mistake.  It focuses on the loss of money and opportunity.  We don’t viscerally remember the money saved nearly as much as we remember money or opportunity lost.  What you should focus on is the profitable discipline of avoiding shitty trades.  Avoiding disasters and large mistakes is half the battle.  Actually, once you have a decent strategy that makes money consistently, avoiding the train wreck is more than half the battle.

Here is what I was looking at when I made the decision:

Here is how the trade ultimately went (without me in it):

Total bummer, right?  Wrong.  If I consistently avoid trades that I know have a low statistical chance of success, I’m way ahead of the game.  This is a 10% trade in my view.  That means if you take all trades like it in the future, 10% of the time you get to point and laugh at all the pussies who didn’t get onboard, and 90% of the time you have to eat the loss.  No thanks.

blog comments powered by Disqus