Posted by: joetradingplace | July 14, 2012

Fear Of Loss

Author: Kev Jones, https://twitter.com/ktj1954

This is just a short article to explain why new traders shouldn’t be afraid of losses. Firstly treat your trading as a business. After all that’s what it is.  All businesses have Incomings and outgoings. Incomings in normal business are sales, outgoings are wages, buying stock etc. Your “trading business” is no different, your incomings are your winning trades, and the outgoings are your losing trades. If you think you are never going to lose a trade, then you are very much mistaken.  Even the best traders in the world have losses, and more than you would expect. So, what’s the secret? No secret really, as in all business, keep your losses small and your wins greater. It’s that simple. Don’t risk too much of your account on one trade, myself I risk as a maximum 2% of my capital and that’s tops, but that’s my preference and what I feel comfortable with. By risking this amount, it will take a lot to blow all my account, as long as I have money, I can trade. It does, however, take a lot of discipline to stick to rules, but if you don’t learn anything from this little article, learn that…If you don’t have any money left, you can’t trade.  If you are just starting out in the world of trading, treat it as a hobby. How much do people spend on hobbies and leisure activities? Let me tell you…A small fortune!!  So is it such a big deal to bank£50, £200 or £500 into an account to get you started? What if you lose it? Well you’ve lost it, its cost you whatever you have lost. IF YOU CAN’T AFFORD TO LOSE IT, DON’T TRADE IT. You wouldn’t even get a set of golf clubs for that, but it could certainly get you going in the world of trading. Learning to trade isn’t easy, in fact it is very very difficult, but so is becoming a doctor, solicitor, or any other highly paid job. But do it right, and you can earn as much as anyone of these professionals.

This is just a short article to help you get over the fear of losing; it was one of my biggest fears when I started trading, almost a decade ago now. Remember losses are OK, and they will happen, expect them to happen, as long as you know how much you are risking, and you are happy to LOSE that amount, take the trade. So, when you look for a trade look for the entry, the stop (risk) and the profit (should be at least 2:1, but that a matter of choice but I use 2:1)

Hope this helps a little in the mind-set of a trader, don’t panic, take the loss, then forget it!!! Move on and stick to your strategy. Good luck and happy trading.

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