Deadly Sins of Trading: Winning the Wrong Way

Low angle view of "wrong way" sign

Many novice traders do not realize that it’s possible to make money from the market the wrong way.

Consider individuals who have failed to adhere to a protective stop on a certain position, and by doing so actually wind up making money on the play. While reporting losses are part of the play even within the institutional and portfolio management world, these individuals feel pleased that they did not honour the stop because the ‘end result’ turned out to be a profit. Little do these individuals know they have committed a crime against the self. Let me explain.

These individuals have gotten a taste of false success, and the market will ensure that they give back this unearned profit sooner or later. The very next time these individuals are in play that triggers their protective stop, what do you think their action will be? To ignore the stop again of course. Why shouldn’t they? They were rewarded the last time they dishonoured the stop, why should they not go for the same reward this time? But this time, the stock may not rebound as the last one did. This time they may have gambled on a stock that has just begun a multi-week free fall that won’t end until it puts a large dent in their trading accounts. You must be aware that making money incorrectly reinforces bad habits and irresponsible actions. Once traders get the taste of success that comes the wrong way, they are almost compelled to repeat that wrong until it robs them and takes back what was incorrectly earned and more. The market is a very funny thing. It seems to dislike rendering profits to those who really deserve it. so try to win the right way. It’s more lasting.

Professional traders are not interested in getting lucky in the market. They do not seek, hope for, or even enjoy the wins that come to them, in spite of their errors of faulty trading acts. In fact, each time a trade is rewarded by chance, instead of skill, many of these traders will feel as if they’ve lost. Why? Because the real winning traders fully understand that there are no gifts in the market. What appears to be a warm gift is really a cold debt in disguise, one that will have to be paid back with outrageous interest. It is only novices, who look for gains any way they can get them.

The undeveloped traders find themselves in winning situations so infrequently that they wish for and eagerly snatch at profits in any form they can get them. But little do they know, they cannot lay rightful claim to any profit that is not the result of their skill. They fail to realize that profits achieved by way of faulty acts are not profits at all. They are loans that might as well have been accepted from a loan shark. for they will have to eventually be paid back.

Right actions and right methods won’t always produce profits for conscientious traders. But one thing is for sure. The wrong act, repeatedly committed, will eventually be a sloppy trader’s demise. Stay debt free, Make sure you are winning the right way.


Here are a few simple steps that will keep you on guard against the deadly sin:

  • After every winning trade, review each component of the trade: the entry, the initial stop placement, the waiting, the money management, the exit etc. Check for errors or rule violations. If you find any, chalk the trade up as a loss and include it in your daily trading journal with comments describing what needs to be corrected next time. Tip: One of the key problems is associating the feelings of a winner to those trades that really are not wins. Whenever traders allow themselves to feel like winners on a trade, those are not really wins. This will tend to reinforce the wrongful acts, and encourage one to repeat the mistakes. Needless to say, the errors eventually catch up to the trader.
  • Recognize that the two evil Hs, hoping and holding, will be the major culprits that most frequently lead to winning the wrong way. Playing the market like an ostrich might play it will often work when the market is in an impressive bull mode. When the market is not so accommodating, it tallies all the unearned profits taken and submits a bill. This bill is often so big and painful that many traders go bankrupt and are never heard from again. Truly recognizing that the two evil Hs, hoping and holding, ultimately lead to a trader’s demise is one way to keep it in check.

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