Hindsight is a Parasite

Two things that many new traders and even experienced traders waste their time on is regret and hindsight. They look at charts and see the past so clearly on them, they should have bought here, they should have sold there. Why didn’t they? The charts look so obvious in hindsight. We really should not waste one second of our time or one ounce of our valuable energy thinking about what we should have done. We should have been following our trading plan in the past.

The only regret we should really have is that we traded too big, too much, or took an entry that was not part of our trading plan. We may be able to take a lesson away from a losing trade but the only thing we should have been doing at the time we entered and exited a losing trading was following our trading plan. Taking a preplanned entry and exit based on what we knew would give us the best probability of a winning trade was the right thing to do.

When I take a trade I have reasoning behind it, I have a signal. I take trades with a favorable risk/reward ratio. My job is to manage the risk of it being a big loser, and my trades are inside a larger framework of a trading system. I do not take a trade without accepting the possibility of it being a loser. As we trade, we take the trades we are capable of at that part of our evolution and development as a trader, if it was not the trade that fit us we would never have taken it in the first place, we own it, the losses and the lessons.

In trading the rear view mirror is crystal clear and very deceptive, we trade by looking out the windshield and it is very foggy and hard to see the road as we go. We can not control where price goes, we can only control what we do. All we can really do is follow our own predetermined plan and aim at long term success as our edge plays out over many trades. New traders discover quickly that the past was not as clear cut when it was the present. No one can predict the future because it does not exist yet. No one can time travel back to the past because it is gone. We can only trade in the present moment and the hard right edge of the chart isn’t there until after our entry and exit happens. We did exactly what we did in a past trade because of who we were as a trader at that time. It could be no different or it would have been.

How do you stop trading with much regret & hindsight? Develop a trading plan. Start following your trading plan 100% in the present. Discipline and self control will eliminate a lot of trading hindsight and regret as you move forward in time.