Monday, January 08, 2007

Learn to lose

Very unpleasant, but totally unavoidable subject.
Everyone loses, some lose on 50% of the trades, some lose on 70%, sometimes the very best traders in the most powerful bull/bear market lose 30%, but EVERYONE LOSES on "some" trades, this comes with the territory, this is in the nature of the great market game.

The difference is - HOW TO LOSE, how to handle huge emotional impact of losses. Beside of "8%" rule and many other rules for losses, good trader has to develop "emotional resistance" to burning desire to feel the pain of loss way more personal than enjoying making money on the trade. Everything that matter at the end of the day, month, year is to be at a profit at the total portfolio level. It does not matter if you lost $1000 on each of 5 trades you made this week, what matter - you have to be able to concentrate on next, winning trade having potential to make $6000 and put you in profit of $1000 for a week.

If you let your losses to get under your skin, chances are - you are not going to be able to find that winning trade and as time goes by you will come to the only possible "end of story" - total loss of assets, "chips" and you'll be out of the game if not forever, than for a long time. Don't be addicted to trading, be professional ( even if you are "amateur", enjoy the game and enjoy the score ( making money ) more than thinking about losses. Don't become hostile as a result of losses, if you do - next step will be arrogance - and that is a deadly sin for trader, such trader destined to lose it all.

Just like life - in order to enjoy and appreciate life and success one has to fall and pull himself together - prize will be sweet!