Most traders believe in the dictum "discipline over conviction". Maybe I'm a fool, but I certainly don't. Discipline is what stops you out of trades needlessly; conviction keeps you in so that you can reap the potential rewards. That's especially true in my case, because I also defer to the fundamentals. Consequently, I'm right more often than someone who's purely technical (and I don't mean that in the pejorative sense). I can't afford to get stopped out just because of a little squiggle on a chart. To use an extreme example, Michael Steinhardt would add to his short positions even when he was down by more than 50%. Now that's conviction. What do you people think? Does discipline really trump conviction? Tycoon
Conviction, even when you're dead right, can blow you out of the water -- how many funds got their heads handed to them shorting the naz 99-00? Conviction without discipline is worse than worthless, it is fatal. You make it sound like discipline is only applied in cutting losses, but you can also say discipline is necessary in staying the course in a profitable trade and not getting trigger happy; I'd even argue that this second form of discipline is even more difficult to master. JMO
I don't know what type of trading your talking about (intraday, weekly..) but I say if your wrong on your conviction then the market will just leave you in the dust and broke. I say get out if your wrong, you can easily get back in the same direction as your conviction in the near future. Why ride out a huge retracement when you don't have too?
It seems to me that you have an answer to your own question. Getting taken out of a trade every time there is a "Squiggle" on the chart bothers you. It also does not seem to be consistent with your overall long term strategy. Frankly, it works me too. But I bet there are traders here who put on a trade 10 times and take it off 10 times and on the 11th time it does what they want. And that is great "FOR THEM", but since it bothers "YOU" find a way around it without blowing up your account out of pride. So if you are convinced that a trade is right, then why not hedge with an option or other vehicle to give yourself some wiggle room? At some point you may have to say I am wrong and take the loss, but that is part of the business.
if you have knowledge you can have conviction, if you don't have knowledge you can only be disciplined
if the markets moving against you, your damn conviction wasn't really worth a whole lot was it? I suppose even if everybody else thinks it's going down and I alone think it's going up, that eventually I will be right. Here is my portfolio. It's down 50%. So therefore I am going to add to my existing losing positions. Now, a disciplined trader would have bailed long ago, but you don't make money by being disciplined. You make money when your convictions are right. How do I know my convictions are right? Easy, I never admit they are wrong. Disciplined traders are always admitting they are wrong. I AM A TRADER OF CONVICTION! It's coming back I tell ya! Like I said when QQQ was at 50, "They are going to 80" You mark my words, they'll be there again someday. The stock market is no place for a man without conviction. And it takes a lot of discipline to be this convicted.