Tuesday, April 17, 2012

How to Handle Losses


1. Do not live and die with each trade. A single trade is insignificant in the overall scheme of trading.

2. Regard each loss as a single event. If you experience a string of losses, each loss is an independent event. Consecutive losses are nothing more than coincidence. The market is impersonal and not out to prove you wrong.

3. Take a break from trading if you find yourself too emotional, or reduce your position sizes (preferably to minimum) until confidence is regained.

4. After a loss, do something productive or take a walk to gain some perspective.

5. Have faith in your trading system. It is logical and has been backtested extensively.

6. Look forward to your next trade and move on.

7. Remember your long-term goal - financial independence. The pain is worth it. You will look back and admire your resolve.

8. Analyse every loss and salvage lessons. Lessons create future profit.

9. A loss is a stepping stone to future success.

10. Every trader experiences losses. You cannot avoid them.

11. When using a valid trading system, a loss is nothing more than a cost of business.

12. Coping with losses creates mental muscle and discipline. Bear the pain and become a stronger trader and person.

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