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In it to win it!
Without question, every single person reading this is trading to be a winner.
After all, who enjoys losing in anything?
Sure, society has turned to participation medals just for showing up and it doesn't even matter if you actually gave any effort. In the end
though, being number one is what it's all about and there is only one gold
medal available.
Watch the sadness on the faces of players in the NFL who come second
place in the Superbowl. Look at the body positions of NHL players who end up watching the
other team parade the Stanley Cup. Losing hurts.
Looking at trading, you will either win/lose/draw and most people will say they love their winners but hate their losers. Trading losses not only
means you were wrong on a particular trade (I will get to that) but it also took
away the commodity we all need to place a trade: Money.
This fear of losing money causes people to do silly things like cut great trades short or worse, talk themselves out of a legitimate trading opportunity.
Those traders who've succeeded on levels most only dream of may have different trading methods but one
thing most have in common is: They embrace their trading losses.
They actually have become great losers! They do not fear the losses and in fact, the
outcome of a singular trade is not something they really care about.
Sound crazy?
Losses are part of trading and they will come in random fashion regardless of any method or style of trading you do.
Side Note: You trading system MUST have an edge
You never truly know if this trade is going to win. You have the probability
behind you (because you do have a trading edge) but in truth, you are
never 100%.
Accepting you will suffer trading losses multiple times in a sequence is one
huge step to moving yourself into the realm of the chosen few who survive this rough and tumble world of online
trading.
Look at each loss as the cost of doing business much like any business that
must buy raw materials to manufacture goods. That loss will
eventually lead to profits.
Understand though that accepting the outcome of any one trade with the
attitude of "don't care" doesn't mean you can slack on the other aspects of
trading.
You must stick to your trading plan You must manage the risks of what
you can control You must shed hope and fear
Here's a question for you.
Variables have lined up according to your tested trading plan that signifies a trading opportunity. You get triggered
into the trade and the outcome is a losing trade. Were you wrong?
When your trade is going against you and what got you into the trade is no longer present, get out. While many
traders live on the hope that the trade will rebound, the others don't have that word in their vocabulary. Hope
has no place in trading.
There are times that price action is clear that the market direction is not going to be in your favor. If you have
worked what adverse price action looks like into your trading plan, you must abide by your rule of exiting.
After all, that is part of your edge as well, right?
You can't hear it enough. Take your losses. Love the losses because that exit..that proper exit.will save your
trading account.
One other great thing about getting out of trades that are not going as
planned is freeing of capital. If I am in a trade that is not performing, my
capital is still tied up. By exiting something that is failing, I now free
the capital to engage in another trade that is setting up according to plan.
There will be times when you exit and the price rebounds. Yes, that happens. The beauty of trading is that as long as you have capital and a signal to enter a
trade, you can get back on board!
It's easy to write about trading losses but as the reader, you have to truly
understand what that loss means and how it serves your overall goal of
trading success.