This is something you’ll hear successful traders say all the time. If you’re going to
be a successful trader, you will have to learn to love taking a loss.
Basically, what that means is it does not bother you to have a losing trade. Don’t get me
wrong, you’re not going to be happy to have a losing trade, but you should be happy to be out of
the market when the trade no longer represents a profitable opportunity.
Most people who learn this do it the hard way. They end up losing all their money before
they realize how important it is to love taking a loss. Instead of ignoring the fact that they have a
losing trade (like most people do), successful traders confront the possibility of being wrong, and
thus, when the time comes to take a loss, they do it without hesitation.
“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
I think the reason that so many people have trouble getting out of their losing trades is
because they think the losing trade is a reflection of themself. Nothing could be further from the
truth. Your losing trades do not diminish you as a person. You are not your losing trades. You
are also not your winning trades either. They are simply by-products of the business that you’re
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 than
done, but nevertheless, it’s still the reality of how to make money trading.
One thing you’ll need to learn is why it’s so important to confront the possibility of a
losing trade. If you don’t, you will generate fear and end of up with the very situation you are
trying to avoid. When you can learn to understand this concept, only then can you prevent your
losing trades from becoming unmanageable and, quite possibly, from wiping out your entire
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 so
important. It puts you in a much better position to take the winning trades.
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