It is better being profitable than being right, in the stock markets or your trading.

Ultimately, what demonstrates or determines your success in stock markets is how much money did your trading put in your bank account. Some of you might even be wondering, how can one be profitable if he/she is not right. You have to be right to make money, isn’t it? Yes, that’s correct as well.

Let me explain this. Most of the traders that I have met, do not use STOP LOSS for one reason or the other. I have seen, when they take a trade, and it goes against them (i.e. trade turns out in a loss), most people generally keep holding the position in the ‘hope’ that it would come back. They suddenly turn ‘investors’ from ‘traders’. You would have come across many of them since January or October 2008. The reason they keep holding is that they do not accept the fact that they were WRONG. It is against their ego to accept it. Instead of accepting that they were wrong in that particular trade and close the position, they keep praying and hoping for that trade to become profitable. How? No one knows.

I have been in such situations many times before and still do. And then, I remind myself “It is better being profitable than being right”. I have to be alive first, and then make a move forward. So what, if I am wrong in this trade? If I get rid of it quickly, I can cut my losses quickly and make money in another trade on next opportunity. If I keep holding on to the wrong position and do not correct, I will keep incurring further losses. Stock markets don’t show any mercy on any one. They will take all your money and leave you gasping, IF YOU DO NOT USE A SAFETY NET which is STOP LOSS for such situations.

One can not be correct all the time. Even GANN was wrong 7% times (they say he had over 92% success rate) but then he used STOP LOSSes to keep himself alive in the market.

Anytime that you are wrong in predicting the move of the stock or index, just remind yourself “It is better being profitable than being right” and ALWAYS, use STOP LOSS, ALWAYS.