{"id":4024,"date":"2014-06-06T11:43:44","date_gmt":"2014-06-06T15:43:44","guid":{"rendered":"http:\/\/www.morpheustrading.com\/blog\/?p=4024"},"modified":"2022-04-06T15:05:04","modified_gmt":"2022-04-06T19:05:04","slug":"trading-psychology-being-wrong","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/trading-psychology-being-wrong\/","title":{"rendered":"The Right Way To Be Wrong (Trading Psychology)"},"content":{"rendered":"<figure id=\"attachment_4027\" aria-describedby=\"caption-attachment-4027\" style=\"width: 300px\" class=\"wp-caption alignright\"><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-4027\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2014\/06\/wrong-is-right-300x199.jpg\" alt=\"Photo courtesy of \u00a9iStockphoto.com\/nigelcarse\" width=\"300\" height=\"199\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2014\/06\/wrong-is-right-300x199.jpg 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2014\/06\/wrong-is-right-110x73.jpg 110w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><figcaption id=\"caption-attachment-4027\" class=\"wp-caption-text\">Photo courtesy of \u00a9iStockphoto.com\/nigelcarse<\/figcaption><\/figure>\n<p>When I was a new trader many years ago, I hated being\u00a0wrong with my market analysis and stock picks.<\/p>\n<p>I was also quite reluctant to admit when I was wrong.<\/p>\n<p>But I eventually learned there is absolutely nothing wrong with being wrong, just as long as it is done the right way. Whew! Got that?<\/p>\n<p><strong>You should love to be wrong<\/strong> because it means you are truly on the pathway to trading success (which is a journey, <em>not<\/em> a destination).<\/p>\n<p>In this trading psychology article, I will explain the proper way to handle being wrong in trading, and why it benefits you so greatly.<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">TABLE OF CONTENTS<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/morpheustrading.com\/blog\/trading-psychology-being-wrong\/#Why_Long_Is_No_Longer_Wrong\" >Why Long Is No Longer Wrong<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/morpheustrading.com\/blog\/trading-psychology-being-wrong\/#If_Youre_Wrong_Simply_Move_Along\" >If You&#8217;re Wrong, Simply Move Along<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/morpheustrading.com\/blog\/trading-psychology-being-wrong\/#React_Dont_Predict\" >React, Don&#8217;t Predict<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/morpheustrading.com\/blog\/trading-psychology-being-wrong\/#No_Damage_Done\" >No Damage Done<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Why_Long_Is_No_Longer_Wrong\"><\/span>Why Long Is No Longer Wrong<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In my May 29 blog post, I shared <a title=\"Why Stocks Could Be Forming A Top, Despite The S&amp;P 500 Breakout\" href=\"https:\/\/www.morpheustrading.com\/blog\/stock-market-topping-process\/\" target=\"_blank\" rel=\"noopener\">my analysis<\/a>\u00a0on why stocks\u00a0may be\u00a0forming a top, despite last month&#8217;s breakout in the S&amp;P 500.<\/p>\n<p>Since then, the overall market environment has improved substantially, and all <strong>four warning signals I discussed are in the process of being invalidated<\/strong> (or already have been):<\/p>\n<ol>\n<li>Long-term T-bonds have corrected sharply (on higher volume). $TLT, for example, has already dropped back down to\u00a0its 50-day moving average.<\/li>\n<li>The NASDAQ has rallied above the high of the left shoulder of its weekly <a title=\"How To Trade The Head And Shoulders Pattern\" href=\"https:\/\/www.morpheustrading.com\/blog\/trading-the-head-and-shoulders-chart-pattern\/\" target=\"_blank\" rel=\"noopener\">head and shoulders<\/a> chart pattern.<\/li>\n<li>Performance in leading stocks is improving (although leadership still primarily remains in large caps).<\/li>\n<li>Overall volume patterns are improving, meaning stocks are starting to show\u00a0more convincing signs of institutional accumulation.<\/li>\n<\/ol>\n<p>Given that stocks are blowing\u00a0off all four\u00a0warning signs I recently highlighted, it&#8217;s quite\u00a0fair to say <strong>I was wrong in my recent bearish analysis.<\/strong><\/p>\n<p>Although my objective analysis was completely valid at the time I wrote it, the stock market has clearly been proving me wrong since then.<\/p>\n<p>Nevertheless, I am perfectly okay with being proven wrong because <em>I have learned to love being wrong.<\/em><\/p>\n<h2><span class=\"ez-toc-section\" id=\"If_Youre_Wrong_Simply_Move_Along\"><\/span>If You&#8217;re Wrong, Simply Move Along<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In trading and investing, you&#8217;re going to be wrong a lot\u00a0(even Warren Buffett is).<\/p>\n<p>But being wrong does not\u00a0necessarily mean you will lose money; whether or not being wrong leads to major losses is ultimately\u00a0up to you.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-full wp-image-4030\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2014\/06\/stubborn.png\" alt=\"If you&#039;re wrong, move along\" width=\"300\" height=\"225\" title=\"\">When you are wrong, do you quickly realize it, admit it, and take corrective action?<\/p>\n<p>Or <strong>do you let your ego rule<\/strong> your decision making and thereby cling to your opinion?<\/p>\n<p>Being wrong is absolutely fine (get used to it), but <strong>what is <em>not<\/em> okay is staying wrong!<\/strong><\/p>\n<p>Sure, being right is fun\u00a0and it feels good when your plan works out. After all, we&#8217;re only\u00a0feeble earthlings.<\/p>\n<p>Nevertheless, being a slave to your<em>\u00a0<\/em>ego is <strong>one of the most detrimental mistakes a trader can make.<\/strong><\/p>\n<p>Regardless of whether you are right or wrong in your\u00a0daily trading decisions and stock picks, it is crucial to <em>check your ego at the\u00a0office door <\/em>every morning<em>.<\/em><\/p>\n<h2><span class=\"ez-toc-section\" id=\"React_Dont_Predict\"><\/span>React, Don&#8217;t Predict<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Regardless of what type of\u00a0<a title=\"Overview of my trading strategy\" href=\"https:\/\/www.morpheustrading.com\/best-swing-trading-strategy\" target=\"_blank\" rel=\"noopener\">trading system<\/a>\u00a0you follow, one of your most important keys to success is <strong>disciplining yourself to merely react<\/strong> to price action, rather than attempting to predict it.<\/p>\n<p>Being a reactive trader keeps you <strong>nimble like a ninja,<\/strong> which is of paramount importance when dealing with an increasingly dynamic stock market.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright size-medium wp-image-4033\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2014\/06\/trade-like-a-ninja-300x292.jpg\" alt=\"React to trading like a ninja\" width=\"300\" height=\"292\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2014\/06\/trade-like-a-ninja-300x292.jpg 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2014\/06\/trade-like-a-ninja-110x107.jpg 110w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/>One common mistake made by many new traders is relying on the deceiving emotion of <em>hope.<\/em><\/p>\n<p>Along with fear, greed, and regret, hope is one of the <strong><a title=\"4 Most Dangerous Emotions For Traders\" href=\"https:\/\/new.morpheustrading.com\/blog\/trading-psychology\" target=\"_blank\" rel=\"noopener\">four most dangerous emotions<\/a><\/strong> that can destroy your ability to reap consistent trading profits.<\/p>\n<p>Here is a typical example of how hope gets you into trouble&#8230;<\/p>\n<p>You form an opinion of what stocks may do (nothing wrong with that part), the market proves you wrong, and then you fall into <strong>the trap of hoping you will\u00a0ultimately be right<\/strong> and stocks will still move in your anticipated direction.<\/p>\n<p>Rather than quickly cutting any losses and reacting to what is actually happening in the market, you continue\u00a0to stay wrong, which in turn sends you and your trading account into a downward spiral in the blink of an eye.<\/p>\n<p>Has that ever happened to you?<\/p>\n<p>Way back in my formative years as a trader, it happened to me more times than I care to remember, but <strong>I eventually learned the hard way<\/strong> (there&#8217;s no better teacher than losing money) to simply react.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"No_Damage_Done\"><\/span>No Damage Done<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Despite my recently bearish market analysis here on my blog, I want\u00a0to make it clear that the model portfolio of my<strong> <a title=\"Sign up for The Wagner Daily\" href=\"https:\/\/www.morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noopener\">nightly stock and ETF newsletter<\/a><\/strong>\u00a0is currently positioned \u00a0<em>only on the long side<\/em> of the market (and has been for several weeks).<\/p>\n<p>I have been long, not short, because the <strong>price action never confirmed my bearish analysis.<\/strong><\/p>\n<p>Practicing what I preach, I have merely been reacting to price\u00a0action as it has been unfolding, and overall market\u00a0sentiment has been increasingly bullish.<\/p>\n<p>If you follow my blog, you need to understand that <em>any<\/em>\u00a0technical\u00a0analysis I share, bearish <em>or<\/em> bullish, is always subject to actually being confirmed by price before any action is taken in my stock picking newsletter.<\/p>\n<p>Although\u00a0there were indeed plenty of valid reasons why stocks were likely headed lower, and <strong>I was fully prepared to act on the short side<\/strong> if that happened, the market went the opposite direction instead.<\/p>\n<p>As such, I simply avoided the short side of the market and (cautiously)\u00a0followed the trend\u00a0on the long side instead.<\/p>\n<p>The\u00a0market timing model of my <a title=\"Subscribe now\" href=\"https:\/\/www.morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noopener\"><em>Wagner Daily<\/em> newsletter<\/a> is now in &#8220;buy&#8221; mode, and the model portfolio is now holding\u00a0a handful of stocks and ETFs (most positions\u00a0presently\u00a0showing unrealized gains).<\/p>\n<p>If you learn to consistently\u00a0<strong>t<\/strong><strong>rade what you see, not what you<\/strong><strong> think, <\/strong>you will already have conquered one of the most challenging aspects of active trading.<\/p>\n<p><em>If you found this\u00a0trading psychology article to be helpful, please share this blog post with your favorite social network (click icons on left).<\/em><\/p>\n<div class=\"cfmonitor\" style=\"padding-top: 30px;\"><center><script src=\"\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\" async=\"\"><\/script><!-- Footer of content - Large --> <ins class=\"adsbygoogle\" style=\"display: inline-block; width: 336px; height: 280px;\" data-ad-client=\"ca-pub-7565144363001883\" data-ad-slot=\"6017996961\"><\/ins><script>\/\/ <![CDATA[\n(adsbygoogle = window.adsbygoogle || []).push({});\n\/\/ ]]><\/script><\/center><\/div>\n","protected":false},"excerpt":{"rendered":"<p>When I was a new trader many years ago, I hated being\u00a0wrong with my market analysis and stock picks. I was also quite reluctant to admit when I was wrong. But I eventually learned there is absolutely nothing wrong with being wrong, just as long as it is done the right way. Whew! Got that? [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[3],"tags":[],"class_list":["post-4024","post","type-post","status-publish","format-standard","hentry","category-stock-trading-strategy"],"_links":{"self":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/4024","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/comments?post=4024"}],"version-history":[{"count":1,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/4024\/revisions"}],"predecessor-version":[{"id":11326,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/4024\/revisions\/11326"}],"wp:attachment":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/media?parent=4024"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/categories?post=4024"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/tags?post=4024"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}