Lose Your Way To Trading Success

I literally receive hundreds of questions each day via e-mail, FaceBook and various other mediums. And while I can’t always get to each one on a timely basis, I eventually wind up answering each and every one. Some require very brief explanations from me. Others foster the need for more elaborate responses. Every so often, however, a follower, trader or student of mine asks something that I feel has universal undertones. Whenever this happens, I try to find a way to share the question and my response with the world.

Below you will find such a question from my dear friend Anna. I won’t mention her last name to protect her privacy, but she asks a question about conservatism which I feel many grapple with at one time or another during their trading lives. The question and my response are detailed below for your review. I hope they both prove helpful.

Question
Anna: “Dear Oliver: I’ve been following you since March of 2009 and I’m afraid that the demon of being a bookkeeper has made me very conservative while trying to learn this craft we call trading. In other words, my cautious nature provokes me to play timidly at times with very small positions verses using fuller lots. Some have argued that I need to step it up now, that the baby steps should now be put behind me. Your opinion is greatly appreciated. Is cautiousness useful or is it a hindrance to growth in this endeavor? By the way, I have read and re-read your book "Tools and Tactics." It is a great read and a great help.”

Answer
Oliver: Dear Anna: I believe that there are times when conservatism is smart, but in most cases, it serves as a reason for people to simply “not act.” Fear, the greatest of all enemies, is camouflaged by the nobel notions of conservatism and responsibility. And I’m afraid these practices, over done, will not allow you to break-through to higher levels of trading proficiency, which almost always require a more care-free, "give it a shot" mentality.

In many ways, being overly cautious and careful suggests a lack of trust in you to do the right thing, should the trade go bad. After all, what’s so bad about a loss anyway? One losing trade is meaningless in the grand scheme of an entire lifetime of trades, so placing too much focus on whether the trade in front of you now is going to work or not work is a very big trap...a big mistake.

So yes, I say, "practice" being more care-free. Give it a whirl more often. This does not mean that you should give yourself a license to be reckless, but whenever you find yourself in doubt about doing a trade, just get in anyway and see what happens. And guess what? You'll be pleasantly surprised to find that even if many of these trades don't work, you are still alive. All your limbs are intact. You can still breathe. You're still the same "you." And the Earth is still somehow rotating on its axis, just as it has been doing for millions of years. Life is not all that changed after a trading loss.

What’s more, losing as a trader has a mysterious way of moving you one step closer to success. I know this sounds paradoxical, but it’s very true. In fact, I’ll go as far as saying that you actually lose your way to success in this game, because success is arrived through the process of negation….“Not this…not that.” Once you find out all the actions that are not right, what’s left? Right action is left. Right action just "is" when wrong action is not. Do you get this?

You see, Anna, losing reveals our weaknesses and the many hidden flaws preventing us from seeing the open blue skies above us. If we did not have losses, which are true angelic messengers in disguise, these flaws and hidden hindrances would remain undetected and be allowed to fester into greater problems. Imagine what would happen if pain was not the result of placing your hand directly in fire flames? You’d move your hand away much more slowly, which would in turn cause even more damage. Stupidity should be painful. Wrong action should result in loss. Loss is a tool, my dear. It has value for those who know what to do with it.

So let’s put a major dent in this sense that you need to be overly careful. Let’s try to turn this respect you've been erroneously giving to the notion of "being responsible" into a greater sense of freedom and “nowness.” In other words, let your hair down, damn it and just let it fly, my dear. After all, it’s only money at stake. Who cares?