If you can’t argue for the other side, I question your argument

A closed mind is a trap

I listened to a podcast a few years ago, an episode of Penn’s Sunday School, and Penn Jillette made a very subtle statement that really stuck with me. Penn said roughly what I have for a title here. If you can’t argue for the other side, I question your argument. He noted he hasn’t much interest in having an argument, a discussion even, with someone who clearly is making a one sided argument and has no depth of knowledge on the counterargument.

This rings clear because a reasonable mind would generally appreciate, and even accept, some points that counter them. A complete lack of acceptance or knowledge of an opposite opinion often indicates the party hasn’t thoroughly considered the unimaginable…that they may be wrong. They haven’t flushed out the full spectrum of tangibles that may have impact on their outcome. They are not prepared, so why debate?

Failing to consider all outcomes and failing to see outside of your desired results can take down the best of businesses and few are impacted as much as those who trade for a living. Many of the great tenets of trading harp upon the virtue, the law, of risk management and preserving your capital. Failure to identify your risks and the power behind that risk, essentially the counterargument to your trade, is fatal. You know why you are buying that E-mini contract…do you know or understand why someone is selling it to you?

It can be said that knowing your “out” price, either your stop-loss or profit order, is more important than knowing your “in” price. Know where you’re going to get out before you get it. If this is the case, knowing the impact of the counter to your argument for placing a trade is more important than your reasoning to take the trade in the first place. Your out could be a stop-loss that’s based entirely on dollars lost or something other than fundamentals, but it’s helps build an understanding of why you were wrong.

Trading is a confidence game. You have to be able to pull the trigger and take on that risk. Do you have the confidence to defend your position? Are you open to hearing why you may be wrong? Let’s not forget, even the best of traders are wrong ~ 50% of the time. That’s a big number. What other job could you have where you can wrong that often? If you can accept that, you should certainly be able to accept a counterargument to your thinking and still place your trade.

So find your sounding board. Talk it out. Use the resources you have to look at all angles and see the landscape from all directions. Talk if out to yourself if that’s all you have. Verbalize your trade and listen to your own description of it. Write it out and flush out the idea with all senses.

We’re all looking for good round-trips. Round out your trade first and you may just increase your odds at a better trade.