TAKE THE HIT ON YOUR CHIN AND MOVE ON!
The hardest and most painful aspect of trading whether we are beginners or professionals is to not only accept losses but also to take our losses. For some of us and maybe most of us, we have this tendency to let our losses run in the hope, that somehow, just somehow, things will turn around and we can then get out at break even. And to further add fuel to the fire, occasionally, we find that after holding even after huge losses, sometimes the trade turns around and it comes back to our price and helps us get out at break even. Or most of the time, we get out with huge losses only to see the price turn around and come right back to our price making us feel “if only I had held for just 50 more pips !!”
Usually, when we hold on to losing trades, it probably means that our system/method/strategy has gone AWOL, our money management is all screwed up and in effect, we are no longer in control of the trade. This is a direct result of not having a PLAN or sometimes, a PLAN that we don’t believe and trust. We allow our drawdown to accumulate beyond what we can really tolerate, and where the loss is significantly way more than the stop loss. What this does is prevent us from taking other trades, either because we don’t have the funds due to the large drawdown or we are simply too focused on getting out of the losing trade that we don’t see other obvious setups. Or, we are too scared that we might increase our losses by taking more trades and we therefore refrain from taking any more trades.
So, the losing trade not only loses us a lot of money but also prevents us taking other trades which could have given us some easy money. We could have simply cut our losses at say, 100 pips or so and easily made that amount back by taking 2-3 good trades in a couple of days rather than hold on to the drawdown, lose good trades and finally lose on this trade as well.
Then our emotions start playing havoc with us where the little man has us sat watching the one eyed monster for hour after hour hoping and praying beyond hope that things will somehow turn around further increasing the pressure (stress) on us and making us a nervous stressed out wreck. I have done this so many times that it hurts to think about it. One time while trading emini S&P futures, I was over $15,000 in the red yet I was so convinced I was right I sat through the nightmare day after day and night after night until finally it came back to my break even and I got out. I was so relieved to get out at break even that I remember feeling just as good as if I had actually made $15,000. Unfortunately, my relief over – shadowed my trading because I never checked where price was in the big picture. If I had held my short trade, I would have made over $5,000!
Again, this is our psyche controlling us. I was more concerned with being “right” than I was with losing money. This is our natural ego and is very difficult to control. We are never right or wrong: we only win and lose. The market is ALWAYS right. The ONLY way for me to control all of this is with my PLAN. Nothing gets between me and my PLAN!
Trading IS simple. Learn a system/method/strategy that works for you and stick with it, no matter what. Every system/method/strategy has losing trades. PLAN for the losses and TAKE the losses WITHOUT QUESTION. Losses are an integral part of trading and, planning for them, accepting them, and taking them, will go a long way to making you a much better, successful and profitable trader. In the long run, it saves you a lot of money and far more stress. It might sound a bit contradictory but remember, your loss is your gain.
The hardest and most painful aspect of trading whether we are beginners or professionals is to not only accept losses but also to take our losses. For some of us and maybe most of us, we have this tendency to let our losses run in the hope, that somehow, just somehow, things will turn around and we can then get out at break even. And to further add fuel to the fire, occasionally, we find that after holding even after huge losses, sometimes the trade turns around and it comes back to our price and helps us get out at break even. Or most of the time, we get out with huge losses only to see the price turn around and come right back to our price making us feel “if only I had held for just 50 more pips !!”
Usually, when we hold on to losing trades, it probably means that our system/method/strategy has gone AWOL, our money management is all screwed up and in effect, we are no longer in control of the trade. This is a direct result of not having a PLAN or sometimes, a PLAN that we don’t believe and trust. We allow our drawdown to accumulate beyond what we can really tolerate, and where the loss is significantly way more than the stop loss. What this does is prevent us from taking other trades, either because we don’t have the funds due to the large drawdown or we are simply too focused on getting out of the losing trade that we don’t see other obvious setups. Or, we are too scared that we might increase our losses by taking more trades and we therefore refrain from taking any more trades.
So, the losing trade not only loses us a lot of money but also prevents us taking other trades which could have given us some easy money. We could have simply cut our losses at say, 100 pips or so and easily made that amount back by taking 2-3 good trades in a couple of days rather than hold on to the drawdown, lose good trades and finally lose on this trade as well.
Then our emotions start playing havoc with us where the little man has us sat watching the one eyed monster for hour after hour hoping and praying beyond hope that things will somehow turn around further increasing the pressure (stress) on us and making us a nervous stressed out wreck. I have done this so many times that it hurts to think about it. One time while trading emini S&P futures, I was over $15,000 in the red yet I was so convinced I was right I sat through the nightmare day after day and night after night until finally it came back to my break even and I got out. I was so relieved to get out at break even that I remember feeling just as good as if I had actually made $15,000. Unfortunately, my relief over – shadowed my trading because I never checked where price was in the big picture. If I had held my short trade, I would have made over $5,000!
Again, this is our psyche controlling us. I was more concerned with being “right” than I was with losing money. This is our natural ego and is very difficult to control. We are never right or wrong: we only win and lose. The market is ALWAYS right. The ONLY way for me to control all of this is with my PLAN. Nothing gets between me and my PLAN!
Trading IS simple. Learn a system/method/strategy that works for you and stick with it, no matter what. Every system/method/strategy has losing trades. PLAN for the losses and TAKE the losses WITHOUT QUESTION. Losses are an integral part of trading and, planning for them, accepting them, and taking them, will go a long way to making you a much better, successful and profitable trader. In the long run, it saves you a lot of money and far more stress. It might sound a bit contradictory but remember, your loss is your gain.
15 YEARS OF PASR ON FOREX FACTORY!
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