Trading is not about always winning. Winning and losing are opposite sides of the same coin. You need to accept losses exactly the same way as you would accept your gains. Its the aggregate sum of winnings and losses which ultimately makes money for you.
Once you implement a good risk and money management strategy, you will learn that when you win you will win more than what you lose, when you make a losing trade. Thats called risk reward, and we will explore that in a new subsection, very soon.
Larry Levin says in his book "The Secret of Emotion Free Trading", “Your losing trades do not diminish you as a person. You are not your losing trades. You are also not winning your trades either. They are simply by-products of the business that you’re in.” In other words, your gains are the outcome of market movements and your risk management system.
He goes on to say "Losing trades are part of trading. The most successful traders in the world have losing trades each and every day. They do not get caught up in thinking that the losing trade is part of them. They realize it’s just part of trading, and the sooner they get rid of the losing trade, the faster they can look for the next opportunity to find a winning trade. This is easier said thandone, but nevertheless, it’s still the reality of how to make money trading."
He also quotes - Mark Douglas, author of The Disciplined Trader states, “Execute your losing trades immediately upon perception that they exist. When losses are predefined and executed without hesitation, there is nothing to consider, weigh, or judge and consequently nothing to tempt yourself with. There will be no threat of allowing yourself the possibility of ultimate disaster. If you find yourself considering, weighing, or judging, then you are either not predefining what a loss is or you are not executing them immediately upon perception, in which case, if you don’t and it turns out to be profitable, you are reinforcing an inappropriate behavior that will inevitably lead to disaster. Or, if you don’t and the loss worsens, you will create a negative cycle of pain,that once started will be difficult to stop.”
He goes on to say, “Keep in mind that fear is really the only thing that keeps us from learning anything new. You can’t learn anything new about the nature of the market’s behavior if you are afraid of what you may do or can’t do that is not in your best interests. By predefining and cutting your losses short, you are making yourself available to learn the best possible way to let your profits grow.”
If you can change what these losses mean to you and realize that getting out of a losing trade as soon as you define it as such, you will be able to release yourself from the stress that those losing trades probably cause you now. This is why learning to love taking a loss is soimportant. It puts you in a much better position to take the winning trades."
Not feeling good about a loss is a natural and instinctive reaction to a loss much like the joy of winning. We need to temper and control both of these feelings as we begin to trade.
What can you do about it? Accept the two events with the same calm emotion. Learn to switch off when you trade so that you dont get wild emotions while trading. Take a break, have a cup of coffee, anything that calms you down when a loss upsets you.
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