Before the football playoffs began, a friend of mine told me that the Saints were going to play the Colts in the Super Bowl. Not only that, but he also told me that the Saints were going to win. Sure enough, that’s exactly what happened. And as expected, he called and said, “See, I told you so”. I asked him, “Did you make any money?” “Well, no, not exactly”, was his reply. I said, “Well, it doesn’t really mean anything then – it just doesn’t count”.

So often, opinions, predictions, and biases are made without one important element – “action”. If you tell me the ES is going to rally 15 handles, I will say, “Great, where are you buying it?” When we trade our opinions, we need to have “actionable” trades attached to them, or the opinions mean nothing – they are virtually worthless.

Where traders go wrong is they “worry about being wrong”. I see a lot of traders so worried about being wrong, they find it almost impossible to make predictions with money on the line. They are uncomfortable, at best. Wow! Can you imagine being wrong and losing money – how awful. That previous line is allowing gross insecurity to impede on your ability to execute. That’s why the profit potential is so high in this business. Few take the time to measure their risk, assign their rewards and trade!

Trade with a plan that says, if you’re wrong, the loss is acceptable, but when you’re right, the rewards are great. Traders should make sure their risk is well defined - ahead of the trade. I have a five year old son that can get out of winning trades. In my opinion, that is “deadly” to the success of a trader. Not only is it your ability to “define” where your losers are that will define your success; it’s the “method” you use to define the risk that is equally important. Keep your trading very clear as to what your risk/reward parameters are before ever entering a trade. That way, you will not be afraid to “put money on the line” when “acting” on predictions.