Posted by: joetradingplace | August 6, 2012

Losing is part of the game

People don’t like to lose or to be wrong, that’s our nature. That’s why a lot of traders end up moving their SL so that the market won’t prove that they are wrong. In trading it’s not about being wrong or right, it’s about following your robust trading plan, knowing that you might lose on a few trades, but overally you have the odds in your favour and will win in the long run.

Winning is fun and boost your confidence, but you should also know that losing is part of the game. A loss is not a reflection on your abilities or the methodology; it is purely statistical that not every day will be profitable. Trading is a business and every business has some costs, so to me, a loss is a business cost. A loser to me is a trade that I took and is nowhere near the setups in my trading plan, but if I take a trade that is in my trading plan, it’s not a loss but cost of doing business.

To be successful in trading, you should know how to control your risk by taking small losses and letting your profits run. If you have confidence in your trading method, losses shouldn’t worry you at all. Just take it on the chin and move on, don’t try to revenge when you have lost, because that usually leads to disaster. You never be successful by revenge trading. That’s why I always advise people to take a screenshot of their trades before and after the trade, that helps you when you are reviewing your trades. This helps a trader to learn from their mistakes. For every trade you lose, you have an opportunity to learn something from it and develop yourself into a better trader.

Make sure that your trading journal reflects all your wins and losses, there is no point in cheating yourself. …you might cheat on your trading journal by hiding your losses like rouge traders, but your live trading account doesn’t lie. You might be a hero on twitter posting win after win, but the PL column on your live trading account will always reflect your true results.

Don’t take losses personally, they are part of the game, the most successful traders on the planet lose. Ed Seykota said that “You can’t make money if you are not willing to lose. It’s like breathing in, but not being willing to breathe out”. No one can be right all the time and no one can make money all the time…don’t listen to people on twitter who claim a 100 percent system/strategy…that doesn’t exist and if it does, they wouldn’t be selling it; they will be trading it and making loads of money

People who are of a competitive nature find it difficult to take losses, because they will do whatever it takes to avoid losing. When they have a losing streak, it’s difficult for them to accept failure and they end up overtrading or revenge trading to try and cover the losses…that’s when disaster usually strikes and they end up blowing their accounts.

So learn to take a loss and move on…learn from your losses to make yourself a better trader.

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