If you don’t like losing then you wont like trading, as you will probably have morelosing trades than winners. We all want to be right its human nature, but trading
involves losing and you need to be prepared for this fact. The fact that you lose on
individual trades is not important, its how you run your pro ts and cut your losses
overtime that is. Many traders make money on 50% or less of their trades but by
using money management, and maximising their winning trades, they end up making
money longer term. Perversely losing is part of winning in trading and is not to be
feared.
Don’t Chop And Change Your Method
Many traders after a few losses decide that
they need to change their method or alter it.
So they get a new method and that doesn’t
work, so they nd another one and so on. The
fact is chopping and changing your method if
it has a string of losing trades doesn’t mean
that you have a bad system, all methods even
those by the worlds top traders have losing
periods. If your methodology is well founded
stay disciplined and persevere with it and avoid
the temptation to chop and change.
Don’t View The Market As Your enemy
The market is not an enemy many traders get angry and frustrated with it. It needs to
be respected and approached in a disciplined manner but it isn’t against you or anyone
else, don’t get emotional about it.
Don’t Enter Trades Without A Stop
If you enter a stop when you enter a trade you know what the worst outcome is in
advance and things can only get better! Also placing stops in advance means you will
remain disciplined. Chances are, if you don’t put a stop in the market in advance, you
will be tempted to let the trade stay on a little longer to see if it will turn around.
Invariably it doesn’t, so a small lose becomes a bigger loss. The aim of trading is to
keep losses small and run pro ts, placing stops in advance is vital way of adhering to
this advice.
Don’t Average A loss
This is a method that many traders use to lose money. The logic is simple: when ever
apposition goes against you, hold onto it and keeping adding to it so you repeatedly
lower your average cost. When the market actually moves your way you will be closer
to your breakeven point and quickly end up in pro t. The reasoning is logical in a
game where no margin is involved and time is not important. In leveraged trading and
in particular options trading time passed is lost money. Contracts expire, margin calls
continue, and the market invariably moves in the direction you don’t want it to. While
you may be right in the long run, you will almost invariably run out of money before
the turn in market direction comes.
