How Should You Feel About Losses In Trading?

How should you feel about losses? I once read somewhere that you are supposed to love losses. Does that make sense to you? It doesn't to me.

The worst aspect of losing is that it tends to create pessimism. Traders should feel bad when they lose money only if they fought the market trend, or violated their own trading strategies. The best traders have a healthy "so what, big deal!" attitude that maintains a sense of humor about losses. There is no reason to feel bad about losses if the trading discipline was correctly used. On the other hand, there is no reason to learn to love them either.

Analyze losses, learn from them, and then let them go; move on, that's the best thing to do.

Understanding man's relationship to time is one of life's most important challenges. When man becomes free of time's constraints, he lives life to the fullest and achieves goals on his own terms. Pessimism traps traders in the past, destroys their present, and robs them of the future. Imagine a world without time where the thought of death is not a finality of existence. If money were not the reason for your work-related behavior, then who are you? Where are you and what are you doing? Who shares this existence with you? In the philosophical sense, man creates himself and his existence when he takes responsibility for his actions and his time. Think how any individuals create order, structure, and discipline in their lives. How will you allow a trading loss today affect your life five years from today?

Thinking the wrong way can become self-fulfilling. The trouble with self-fulfillment is that many people have a self-destructive streak. Accident-prone drivers keep destroying their cars, and self-destructive traders keep destroying their accounts. Markets offer unlimited opportunities for self-sabotage, as well as for self-fulfillment. Acting out your internal conflicts in the marketplace is a very expensive proposition.

Traders who are not at peace with themselves often try to fulfill their contradictory wishes in the market. If you do not know where you are going, you will wind up somewhere you never wanted to be.

Every business has losses. I cannot think of any that don't. Shoplifting, embezzlement, internal pilferage, lawsuits, bad debts, spoilage, etc., I'm sure you can think of even more. You name it and businesses have one or more of the many ways to experience losses. Most businesses expect and accept such losses as part of doing business. Why, then, is it such a big deal when you have a loss in trading? If you know the answer to that, please let me know.

The way I handle a loss is this: I examine it, make every attempt to learn from it, and ascertain whether I had the loss by straying from my trading plan. If I have strayed, I reinforce my resolve to stick with my plan. If I have not strayed, then I learn from it what I can, and shrug it off as a cost of business. It is not an expense, it is a cost, and if you don't know the difference you need to take a course or read a book on the basics of accounting.

Joe Ross

I forget it and move on to the next. Thats it.

Chris

'Accepting losses'...? To be honest Joe, it's a fashionable statement on a trading site. Personally i don't like losses, but.....there's a difference between taking loss after loss after loss and running an account into the ground, rather than losses when you have been trading profitably for some time. Try telling a newbie on his last quid that his losses are the same as some seasoned trader's losses. The ability to accept a loss comes with experience and profitabilty. I suppose a person has to be nuts to love losses. I'm all in for the fact that losses come in different forms and experiences through the whole spectrum of proficiency. In certain ways, no two losses are the same, for different individuals...........but that's the markets for you, and that's people.

Accepting loss?

Think about your situation?

Cheers, Rude.

"Thats one hell of a hat you got there Joe"

ere' dont you just love those losses were the market just flicks you out then tanks......and thats after they have done the stops . fair play.

Now then as Joe says losses should be likened to a cost of sales in the business world of trading, like any retail business lets say BUT, hold to mind this is a retailer that encourages you to look at the goods and while you are doing that the managers of the retailers, are skillfully noting how much cash you have in your wallet and where it is, their business is to lift your wallet, while you are eyeing up the goods and the cashier clerk.

so you cant beat em, join em I guess, think like a thief.

Fx.

Rudey

RUDEBOY said:

'Accepting losses'...? To be honest Joe, it's a fashionable statement on a trading site. Personally i don't like losses, but.....there's a difference between taking loss after loss after loss and running an account into the ground, rather than losses when you have been trading profitably for some time. Try telling a newbie on his last quid that his losses are the same as some seasoned trader's losses. The ability to accept a loss comes with experience and profitabilty. I suppose a person has to be nuts to love losses. I'm all in for the fact that losses come in different forms and experiences through the whole spectrum of proficiency. In certain ways, no two losses are the same, for different individuals...........but that's the markets for you, and that's people.

Accepting loss?

Think about your situation?

Cheers, Rude.

Click to expand...

Rude - even businesses fail - deal after deal falling through - cashflow ebbing away. Businesses that succeed have more profitable deals than unprofitable - likewise with trading

It doesn't matter if losing trades outnumber winning trades - as long as they don't outweigh them. It is perfectly possible to lose more often than you win and still be regularly making a profit. Some traders who cut their losses extremely fast don't ever need to get half their trades right, and are happy with a 40% success rate.

You need to keep track of your average win size and average loss size, otherwise you won't know what success rate is necessary.

If your average win is over 50% bigger than your average loss, you can make a profit from winning 4 times out of ten, and losing six times.

Tighten the losses so they average a third of your average win size, and you can stay in profit with 3 wins out of ten. Which gives you a heck of a lot of leeway if your selection skills are not yet very good.


Someone who lets their losing trades slip to -15% before dumping them, while snatching at 5% gains, will need to win more than 7 out of every ten trades, which is a tough call.