We all lose here and there, it’s just part of trading. You can’t avoid it, but that isn’t the issue. Where many traders struggle is how to handle a loss gracefully.
Instead if equating a trading loss with personal failure, shift your mentality for what a loss means.
Does it mean you’re stupid? Not necessarily.
Does it mean you were wrong? Yes, in at least one way.
Does that mean you will never get it back? Absolutely not.
Losses are an event, yes, but it’s also a distribution from your account. Consider them a cost of doing business as a trader. Brick-and-mortar stores have overhead, but as a trader, the biggest portion of your overhead is the losses you take.
When businesses cut costs, they’re reducing their overhead as much as possible to fatten their profit margins. Do the same with your trading. Reduce your ‘loss overhead’ by accepting a loss quickly and moving on to the next trade.
It’s much more fun to always be adding to your account rather than seeing funds flow out, but as soon as you start viewing trading losses as something impersonal, it’s going to change your perspective in a very helpful way. Rather than fret over them and allow losses to cloud your thinking or alter your mood, viewing them through the proper lens will help you more quickly get them back and then some.
Like it or not, trading is a business…how are you managing yours?
I certainly agree that we need to use loss as a tool to fine tune our trading, not cry over, or worse yet, lose our perspective and start trading afraid.
For myself, the recent conditions have taught me that for now the high volatity is a little much for my response time, so I am sitting on the sidelines on the day trading.
Loss certainly wakes me up to the fact that I have no business trying to contend with extreme conditions where we get 1 – 2% pullbacks in less than 3 minutes.
I have had to content myself playing around a little with low priced stocks that are not whiplashing so much back and forth day to day and hour to hour and depending on the trends to continue to my target points. I don’t like these midgets, but know from loss that I need a trend to ride.
Some of them do reverse, but overall, a body in motion tends to continue until hitting an obstacle. Despise the huge jumps down they do, but at least they are consistent, and some ground is gained. They are too flaky to put much money in, but at least keep me away from a game I’m too slow for.
(Please fix the market so I can go back to the fun trading.)
I prefer the day trading method you use, but have to wait till things get back closer to where they used to be.
Again we have had a day where everything gapped and makes the setups invalid, but loss has taught me one certainty, throwing away a plan is just gambling, and inviting loss. We no longer have the distance traveled to the target points to valid the trade, and the market just loves to reverse and fill in gaps. We have to ask ourselves if we feel lucky, and depending on luck is not treating trading as a business.
Best regards,
John
Hey John,
Thanks for sharing your thoughts here on this, it is appreciated! Recognizing our own needs and style is a huge part of approaching trading from the right angle, and it looks like you’re doing that quite well. I like the way you’re adapting (via “midget” stocks!) and avoiding those you don’t like. Also, taking note of how the overall market is behaving carries great weight when it comes to which plays to focus on, and you’re doing that well too. Keep up the good work and thanks again for sharing your ideas here!