As soon as one can accept that trading is a business of accepting losses, the sooner consistent success will come. Losing trades are like breathing, you have to have them in order to stay alive. None of us can ever hope to be right all the time in anything that we take on. This is even more so in the markets where there are countless unknown variables, occurrences and events over which we have absolutely no control and can have no forward knowledge of the impending occurrence.
Accepting losing trades is part and parcel of this business. Successful traders accept this fact quickly and early and take decisive action to cut any losing trades. They do not ‘hang on and hope’. They just cut the losers and move on, knowing that there are countless more opportunities just around the corner. Inevitably those that don’t and won’t accept their losses and cut losing trades will eventually be buried by one or a number of losing trades – the largest loss trades.
The loss itself is devastating but the damage that it does to the soul (psyche) remains for a long time, sometimes forever. Many people are unable to come back to the markets after a devastating loss because aside from the financial damage, they are too damaged psychologically to face both themselves and the markets again. But, as in life, we have to forgive and continue the journey realising that all negative feedback is just an indication of how much work we need to do to improve and grow.
There are only three things that can happen when you put on a trade:
- 1. You win
- 2. You lose
- 3. You break even
Can it be any easier? Why get emotional over a trading outcome that has more variables that are out of your control than are in your control. Whilst we know that it should be simple, we also know that trading can be a far more difficult activity than it should. Our challenge is to determine a regular routine that makes it as easy as it should be and then continue to refine and improve that process in line with what we are trying to achieve.
People are not measured by how they handle success – they are measured by how they pick themselves up after a failure – it doesn’t matter what happens, its how you take it that counts. A small child doesn’t stop trying to walk after the first or second fall. They persevere – they continue on the journey one step at a time. And so it is with trading, the steps never end until you decide to end them and until then you are on a continuous journey of acquiring skills and improving. And along the way there will be no shortage of occurrences to test how well you are doing!
Enjoy the trading journey as it can enrich your life in many ways.