To win or lose a trade is a familiar thing. We have experienced bot the joys and pains of it.
With trading losses, the majority of the time the shortfall comes from the trader and no the trading strategy.
Well, yes there is a good chance this described you. In this article I will talk about ways to change all that. Your stop loss order is a really good place to start, this should be decided before you place an order.
If you want to talk about position entry, it should include a comprehensive explanation of stops. Why do so many investors fail to take advantage of stop losses? It you are one of those not using them, listen up, you’ll want to know this. Stop losses can spell the difference between meager late retirement and on time comfortable retirement.
When you have a plan for placing stops, your wins will out weigh you losses, and when the losses come you will come out on top because you will still be around to trade. The traders psychology of loss taking bears looking at here.
A professional trader needs to know where the exit point in their trades are before they start trading. Having a visual of a wrong trade is key so a trader can know when to get out fast. This is a basic knowledge that all pro traders need to have.
Can you answer the following questions?
1.) What are the indicators for staying put, or getting out?
2.) Do you have a rule to tell you when to sell a losing stock?
3.) Is there a set point for you to break-even by moving your stop?
Are you unable to answer these questions? You aren’t alone. This indicated that you should be establishing some rules, especially when going to short stocks, but trading rules don’t mean a thing if they aren’t used. This is why we need to have a frank discussion about why you aren’t managing your risks in a hands on way, like a pro should.
There are 2 base reasons why Investors won’t take a loss:
1. Admit they are wrong? No Way!
A realized loss is a great big unavoidable acknowledgment of wrongness. For many traders, this is just too painful to admit. It’s interpreted as an allegory for a total life failure or feeds a persistent, negative self-image.
A trader like this experiences real pain from the loss, and would rather deny it than fess up to the fact that it is giving them the pain. Quite often it requires a total loss before he can begin to change. To quit trading is the only other alternative.
2. Taking that large of a hit would damage their portfolio greater than it can recover from.
Losses aren’t just on paper, they are real. The loss is what it is and the quoted price is it’s value.
Both of these examples are a form of self-delusion that millions of investors, both large and small, suffer from. Just look at AIG, Merrill Lynch, WAMU, Lehman, etc. … and you can take comfort in the fact that self-delusion is no respecter of income bracket or social standing.
Are you feeling uncomfortable with what I am saying?… or powerless, or angry? Good! That is a sign that you are capable of making the changes you need to.
Winning and losing traders have a different view of the pain from a loss, winners don’t take it personally. They look at the loss and see that they need to change their approach or execution not that they are personally flawed.
A winning trader distinguishes himself from what he does. They are aware that their worth as a human being is not linked to their skill at trading, but that they will need to increase their skill and experience to improve their approach and execution. They use the pain they feel to motivate themselves and increase their drive to be a better trader.
These are responses you learn and you can control them. Losses bring pain AND the possibility for growth. It is all in what action we take after the pain comes that is most important, not the actual losses.
Stick with my proven ETF Trend Trading system and make winning a habit. Study; ask questions and monitor your position size relative to your portfolio and you will end up on the winning side more often than not.
The continued reminders about “proper stops and risks” is one of the main points in the 1 year mentorship program. When you have a full understanding of my system, it will be important for you to hear me say “Don’t move your stop” and “Take your profits at the time the system says to not before or not after”. The course itself is top notch, but the mentorship is valued more highly among the majority of my students.
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