Interpreting Bad News While Trading

When we enter the field of trading, we often decide early in the process that we are in it for profit, and thus we must make sure that keep our objectives clear and learn to use information and feedback as a method of understanding the situation. In some cases, this is very easy to do. We make an investment and we follow our plan and we sell at just the right point and we make a profit. At other times, interpreting information isn't as easy. We receive what we consider to be bad news and we believe we have made an error in judgment.

An error in judgment is not a mistake and bad news isn't really bad news. It is simply informational feedback that we can then use to evaluate our plan or our actions in order to produce a better outcome the next time we sit down to trade. Our emotional desire to accept this information as bad news is strong, and it takes quite a bit of practice for many to turn their perception around, as we have been taught since infancy that some things are inherently "bad," including losing a sum of money.

In the process of interpreting information, it is vital that we are honest with ourselves. While it is possible to make your win-loss ratio seem much better than it is in reality by intentionally make a few small trades on the "safest" possible trades. While this of course will increase the ratio of how often you gain profits over how often you lose money, it will not give you an accurate representation of the information you need to interpret differently in order to develop a new plan of action based on the current feedback.

Ultimately, when we lie to ourselves and try to represent ourselves as stronger than average traders we rob ourselves of vital information that can enable our own enhancement. We are in this gig to make money. We can't reach our full potential when we are misrepresenting ourselves, even when those misrepresentations are only for our eyes. If we want to be able to produce a better outcome, we have to interpret all of the information, in its entirety, without filtering or self deception.

Training yourself to keep daily records of ever trade, every outcome of those trades, and every strategy that went into those trades will help you to quickly decipher the information you receive when measure your performance ratios. Without knowing why you did something six months ago that resulted in failure, you are likely to repeat the mistake. When you find repetitive patterns throughout your trading history, you will learn what works and doesn't work for your trading style.

Of course, there are those traders that don't bother to use their win-loss ratio for performance evaluation or even really know what their win-loss ratio really is at any given time. You can choose to operate without any type of evaluation of your performance, but you will never be able to learn to be a stronger and better trader nearly as quickly or effectively. You will always have an informational gap stemming from a lack of performance evaluation.

Learning to evaluate your "bad news" and your good news as performance feedback is a huge part of undertaking the trading field as a serious form of making some very serious cash. You can really only get to the point of making serious financial gains when you are willing to be honest, evaluate your performance, and look at your ups, downs, and successes and failures as information that is readily available for your unbiased interpretation. When you can learn this, you can learn how to trade with the high rollers.

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