Someone wrote me the other day and told me that in my chart-reading ability, I was "no better than a weatherman, changing my opinion about stocks faster than a cold front moves in!"
And you know what? I took it as a compliment. That's right, the ability to change your mind is one of the best skills a trader can have. Of course, so is discipline, and there's the dichotomy: You absolutely must stick to your method, or read, of a chart ... until new evidence begs you to change horses. In fact, I'd say most traders' biggest downfall isn't not sticking to their plan, but failing to change when the time is right.
And therein lies one of the hardest aspects of trading: We're all brought up to get good grades, to perform at a high level and to try to be right a lot more often than we're wrong. Yet, as a trader, you have to be willing to concede that you're going to be wrong almost every single day. Furthermore, you not only have to admit that you're wrong, but it's sometimes in your best interest to admit that you were 100% wrong and then take the opposite side of the trade.
Therefore, let me give you four examples where a shrewd "flip-flop" either saved the day, made a good trade better or helped stem the damage.
OK, two things to remember. One, it's perfectly OK to change your mind if a trade isn't working out. In fact, it's often the wisest course of action. On the other hand, don't make the mistake of thinking that every failed trade immediately warrants taking the opposite side. A busted long isn't always a great short, and vice versa.
Remember, a lot of your trades won't work out. However, don't whine or pout about it. Instead, look for opportunity amid the wreckage.
Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes five technical analysis columns for TheStreet.com each week, including Technician's Take, Charted Territory and TSC Technical Forum. While he cannot provide investment advice or recommendations, he welcomes your feedback at