Just how well do you deal with loss?

I want to find out from others how they cope with loss, because I believe that it is loss, and how well each individual copes with it that will ultimately make or break a trader.

We all know that losing is part and parcel of trading, but it's not quite as simple as that is it, because as a trader, when we lose, we lose money, hard earned wonga that we do not want to lose, and when we lose it, we lose it quickly and dramatically, and yes, it hurts. Now I would say that to be in the position where you can simply put the losses behind you and move on to the next trade as if nothing had happened, you either need to be so wealthy that it doesn't matter, or you need to have reached that elevated stage in a trader's career where losing has become an accepted norm, accepted because you know that given a certain number of trades you will come out ahead. But what about taking a loss or sequence of losses before you have reached this celebrious platform in your career? Just how can you approach the next trade with the cool impartiality required when you have just taken a loss or perhaps a sequence of losses and are just desperate for a winning trade? How are you going to be able to put on another trade when your fear of losing again is greater than your expectation of winning? This is the crux, and how you deal with it can be the difference between success and failure as a trader.

I know we all have something to say about this because we have all been there in one form or another. So let's hear it. Maybe you are in pain right now. Maybe you have yet to put your feet into the water and are still demoing but anticipating how you are going to cope with real loss. Or maybe you have come through the fear and have blazoned a path through to the promised land. Surely you will have some great wisdom to pass on. Honesty will be greatly appreciated.

I don't mind losses, I don't tolerate mistakes.

Keep a trading journal.

Pre planned positions which end up as losses are inevitable, statistically in this universe we currently occupy... it is going to happen.

Remember the 7 Pees...Proper Planning and Preperation Prevents Piss Poor Performance.

Seconded.

Some good points are brought up by others.

My only suggestion would be find a way of trading that is most comfortable to you and your schedule.

Hi cat,

I learned to accept losses by changing my beliefs about the outcome of a trade. Accepting that anything can happen, that there is a random distribution between wins and losses, that no matter if I win or loose I always just earn the expected value (unless I trade my system correctly), that the sum of all those little expected values is my profit, that my only task is just to trade my system correctly, that the edge generated by my system is only an indication of one thing happen more often than another (or that one thing just happens often enough, if you trade more than a 1:1 Ratio) and that you don't have to know what happens next to make money. After years of struggling with the same issue like you, I can absolutly say that it is really really important to find a system that absolutly fits with you. Therefor you have to do a lot of selfanalysis and really learn about yourself and how you think, what beliefs you have and what kind of trader you are. You also will have to do lots of testing of your system, so your brain really sees that it can truely trust the system. Because only when you deeply trust yourself and therefor your system (as this is part of who you are) you can follow your Tradingplan if there is a series of losses. I belief the thinking in probabilities and the confidence in yourself and your system are absolute essentially. So when I put on a trade, I know that anything can happen and I also know that because I follow my system and therefor only trade setups with positiv expected value (any other trade would be negative EV for me) - I win everytime.

There are certainly even more beliefs you should work on, but in my opinion that are major issues to work on. A lot of that stuff you will find in the book "Trading in the zone" (by Mark Douglas) but there are also other great books (and authors).

For implementing the beliefs I use self-hypnosis (and still doing it on a continuous basis, as we humans love to forget things ) and explain myself why the beliefs make sense.

So thats it, hope it helps you.

Can you explain me how you do that or show me the way ...where can i learn that ?

I am trying to learn this stuff but have no clue where to start from .

Thanks.

Find a method that wins 75+% of the time and just follow rules and put ttades on

Revenge trading to make up for a loss, the biggest killer of new traders.

First of all make sure that you are trading with a method that has a statistically defined edge. It's critical to have confidence in knowing that when you take a given set up over the course of 50 trades that you'll be ahead. When you get to this stage losing will become easier to accept because you'll understand why it's happening. Another way to look at it is that it's just one trade among the 10,000 that you'll take in your lifetime. When you look at it that way each individual loss is insignificant. I hate losing as much as anyone but I get comfort from knowing that I'll be ahead in the long run.

Yes it's related to how much data and confidence you have in the method by back and forward testing.

I agree. I don't mind the losses. I can live with the predetermined loss I have set. What frustrates me is mistakes. Rather the mistake be moving the stop back for bigger loss or exiting the trade to early for smaller profit, or just missing the trade!

When doing selfhypnosis, you will have to bring yourself in a deeply relaxed state of mind. This is what you can try: Lay down (you can also sit, whatever you prefer), put your hands on your stomach and close your eyes. Normally you will feel some kind of tension in your muscles. Try to start with your face - relax the mucles in your face. Then continue to your right leg, your left leg and do the same with your arms. At this point you should feel so relaxed that there is hardly no tension in your muscles and you feel a bit like being sunk into your bed (or sofa, or chair). Focus either on the hand on your stomach (what I do) or some also focus on breathing/nose. When doing this, there are probably a lot of thoughts jumping into your head. Push the useless thoughts aside and focus now on your tradingbeliefs (like the ones descibed in my post). You can also imagine yourself as the successful trader you want be like, how it is like when you sit infront of your computer and wait patiently and absolutly relaxed for your setups. How you feel totally cofident when there is a long loosing streak, and you put on trade after trade and follow your system no matter what.

Always try to use positiv things and also try to implement positiv thinking in general, as you are the sum of all your thoughts.

Traders often like to defend their system by blaming their losses on "mistakes".

Personally on the really bad losses, the ones which were indeed a massive f up on my behalf, I enjoy breaking things. The worst was a laptop, I broke it into two pieces. Felt great, and a good punishment. Haven't broken anything since.

mouses, keyboards, monitors I've destroyed too many to count. Easily replaced.

A loss is only something to be "coped" with when you are more preoccupied with being "right" than with trading properly. It shouldn't sting with the correct position sizing and strict adherence to one's principles. If it is emotionally affecting, then perhaps the position and the ego are too large.

lol works well with AppleCare

Yes very true. mark douglas says to determine what is AT RISK. for many traders it includes the ego risk.

everyone's obsessed with wins and losses when their real focus should be on profit

That's true. The bottom line is the bottom line.

I think loss within your money management and exit SL rule, it not a bad thing. it is reacting the basic fact no one or no system can have a 100% winning rate. it prevents you from getting arrogant and beginning to trade without rules. trading without loss is dangerous, once a loss has come, it blew up your account once a time!

This is the key. I started this thread because I know that it's probably the biggest obstacle trader's face once they've actually learnt how to trade ( if you are risking money before you have spent sufficient time learning how to trade, nothing will help you).

For me, once I learnt to focus on my performance after x number of trades rather than on each trade, my trading improved immeasurably. It meant that I stopped bailing out of trades because the price went a few pips against me ( unless I knew I was wrong ) and I became better at staying in a trade and not taking profits too early when there was no reason to do so.

I'm not saying this process was easy, but it saved my trading career. Ir is a shift in mindset from the one most people come into trading with, and I believe that without this shift, it is impossible to succeed as a trader.

I've found a pretty mechanical approach to try and wipe away losers with winners.
It looks like this:


It works like this:
Every ticket (#24 in the example) is used for a specific trade.
Every ticket get's 10% out of 10 position's results (10% portions of positions #10 through #19 in this example).
The results of a position are thus not directly taken on balance, but are transferred to my P/L-acc.
Once a ticket is full (#24 example still need 3 fills). the losses are substracted from the winnings.
In the case of a remaining loss: the loss is +'ed to the P/L acc. and -'ed to the Balance.
The remaining balance is what I take 1% risk from.

In the case in a remaining profit: this profit is added as risk on the position #24 in this case.
If #24 results in B/E or better, the profit that was added as risk, will now be credited to the balance (and ofc. substracted from the P/L-acc.)

The theory behind this is that it forces me to: 1. spend time on bookkeeping (keeping a bussiness approach in mind constantly) 2. accurately scale my positions to it's predetermined risk.

And more importantly, "Negative results actively reduce risk to minimum and positive (somewhat consecutive) results, will actively add the the lot sizing.

Writing a loss down on about 11 different .txt files sucks balls, obviously, but it does give you the time to think about what this loss just meant for your immediate trading future.

It also works great surpressing volatility on balance, all the while keeping a keen eye on uncredited P/L.

May it be clear that I'm no professional, nor am I close to becoming one.
For now I'm just one aspiring trader, with an increasingly mechanical approach towards managing money & risk.

Hope it can be of help to anyone,
W.