Trading Psychology  |  JUL 1997

Is Wrong Ever Right? by Adrienne Laris Toghraie

Following a strategy is key to success in the markets, but what if you make deliberately wrong decisions and still make money? Here are some ways to avoid this form of self sabotage. If traders are going to succeed over the long haul, they must follow their own rules; and in order to do so, they must maintain a state of personal and emotional balance. This paradigm is the essence of my work with traders. However, the problem with this strategy is that we are talking about results over time. In the short term, unfortunately, things can happen quite differently; even the most carefully conceived and faithfully followed system will periodically produce losses. And even more vexing is the fact that, sometimes, breaking your rules can result in significant wins. This paradox was brought home to me recently when I attended an industry conference. In discussing with another conferencegoer on how to keep traders faithful to their rules, he pointed out that markets will sometimes reward bad habits and as a result, the experience of doing the wrong thing and winning despite it reinforces the bad habit. As we explored this phenomenon through examples of traders we knew who had fallen prey to this temptation, we talked about what happens to us when doing something we know is wrong gives us an unexpected reward.

by Adrienne Laris Toghraie