“I knew the market was going to take a hit, I just shorted it too early.”
Sound familiar? In my time, I’ve heard too many traders say this, or something like it.
If you’re a member of the “I was right but my timing was wrong” crowd, think about these examples:
1. “I told everyone that the sun was rising in London. If I’d waited just another three hours, I’d have been right.”
2. “I told my friend I’d catch the afternoon flight. If I’d reached the airport by 3pm, I’d have been right.”
3. “I predicted a Democrat would win the election. If I’d waited eight years, I’d have been right.”
I was right but my timing was wrong. Better just say, I was wrong.
After taking a big loss on one occasion, Jesse Livermore said of his error:
“I didn’t wait to determine whether or not the time was right for plunging on the bear side. On the one occasion when I should have invoked the aid of my tape-reading I didn’t do it.
“That is how I came to learn that even when one is properly bearish at the very beginning of a bear market it is well not to begin selling in bulk until there is no danger of the engine back-firing.”
Jesse is saying that if you don’t get both the direction and the timing of the trade correct, then you’re plain wrong.
You should only take a position after the market direction has been confirmed.