I know it sounds like a cliché, but to be able to losing is part of winning, especially in trade. If you want to be a complete traders who really know how to shop properly, you need to learn how to lose properly in addition to actually learning to trade.
I know that this is not a ”fun” topic to discuss and you may not even want to read this article, but I promise you that it would be a big mistake. You will simply never make money as a trader if you do not understand the importance of losing firmly in the market.
So, for those of you who are looking for an ”easy fix” or ”quick money” without any losses might as well stop reading. For the rest of you who really want to have a chance to make consistent money, read on …
Prepare your brain to lose properly …
Too often I see beginners trying to avoid losses on a number of different ways. It seems as if people are preprogrammed by nature to try to avoid losses and it is a common tendency. But when it comes to trade, make it this associated move significant damage and will result in excluded trading accounts and irreversible damage, if you allow it.
Unfortunately, losses are a part of the trade, if they were not it would all be billionaires and we all know it is impossible. The simple reality of trading is that sooner or later, you will lose in trading in one way or another. If you do not take the predetermined and calculated losses, you will take large, and eventually potentially account-crushed losses. Remember; you can slow down the losses, but you can’t avoid them completely, and there is usually a direct correlation between how long you delay a loss and how big it will be.
As traders you only need to see losses as a ”cost” to do business on the market. All the shops have costs that need to be overcome in order to be able to make a profit. If you own a restaurant, you have operating costs such as food, labor, rent, utilities, accounting, etc, If your income surpasses all of these costs you will make a profit, if not, you lose.
Therefore, you will lose the cost when it comes to trading, mäklareavgifter and commissions and any equipment costs as a portable computer, etc, If you start looking at lost business as a part of the costs, you will begin to shift your thinking from ” trying to avoid losses” to ”try to deal with the losses”.
Why you need to learn how to lose properly
By learning how to lose properly you will learn to control your losses. The great thing is that you decide how much money you risk on a single trade, so the ability gives you the power to eliminate any ”surprises” and therefore the emotional pressure from your losses in the market.
Traders are experiencing the pain and frustration of the loss of two reasons:
They expect to gain on a trade but instead they lose.
They lose more money than they are emotionally prepared to lose per trade.
Fortunately for you, these are two things very easy to fix if you are ready to be honest with yourself. To manage your expectations on a trade you need to simply understand that any trade can be lost and you can never feel ”safe”. Thus, you should never ”expect” you to win any given trade, no matter how good it seems to be.
For the exact reason that is just been discussed, you should never risk more money on any given trade than you are comfortable potentially losing. That is to say, you don’t know for sure which trade will win and which trades will lose in advance, you can simply not beat your risk beyond the level you are not prepared to lose. If you still do it, it is your fault that you lose more than what you are willing and all the emotional handelsmisstag you done in consequence of that mistake will only be your fault.
In order to be able to lose properly, you must first examine your business focus. You must stop trying to avoid losses, try to accept and deal with them instead. You need to stop to expect profit with each trade.
How to lose properly
OK, so you have read the above section and you have accepted the outer locking character; a random distribution of winning and losing trades.
Let us now discuss in 5 simple steps how you can lose properly in the trade, you bet on:
The first step is to lose properly is to accept that you will lose no matter what. When you accept this you can move on to the next step which is to design a plan to minimize your losses as much as possible.
Then, you decide the amount or R-value you are comfortable with potentially losing on any one trade. As I have written about before, we measure the risk in pips or percentages, we measure it in dollars or pounds, euros, etc
Now you must calculate your positionsstorlek on the trade. You do this by first finding the best place for SL and then calculate how many lots you can trade to not exceed your predetermined R value on the trade. Remember to place your SL based on the surrounding market structure, not on greed or emotion.
Set and forget the trade. When you have set up the trade and entered all the parameters, entry, exit (stoppförlust and profit target) and positionsstorlek, it is time to forget about trade for a while. One of the best steps to succeed after the data entry is to remove himself from the equation, and I recommend both to professionals as well as beginners.
Do not try to avoid the loss. This is precisely the psychological aspect can destroy you. You absolutely can not make big mistakes like moving your stop loss further away when the price is approaching it. You need to remember that you can not avoid loss. You need to be faithful to your strategy and remain disciplined and accept that the market sometimes will stop you for your pre-1 R loss. A successful handelsavgång can either be winning or a predetermined poor.
The road to success: hold on to your plan and be disciplined.
You have to put your ego and your desire to win each and every trade to the side, because both of these things will cause you to lose money in the market and I know you don’t want to lose money.
Trading is difficult for most people because they can’t get in touch with the fact that they will lose trade as well as to win business. Most of the people are destroying everything with the losing business by trying to avoid them and by doing this they create a ”monster”. This monster is bad handelsvanor which ultimately leads to a kontoförstörande loss.
The only way to win is to control and manage your losses. It is just like owning a business; your revenue must exceed your costs to generate profit.