How To Deal With Losses In Trading

In trading and investing losses are unavoidable. There is just no way around it.

“If you can’t accept losing, you can’t win”  — Vince Lombardi

Every trader and trading system no matter how good generates losses. They are part of the game. Moreover, from time to time losses come in strings.

If a trading system generates 70% of winners, that doesn’t mean that you are going to win 7 times out of every 10 trades. It can be any combination of consecutive wins and losses.

The difference between good traders and failures is in the way they handle their losses. The main points to remember are:

1. Don’t get overly emotional about your losses or wins. Getting emotional about your losses is usually a sign that you risk too much money.

2. Do not increase sizes of your trades in the hope to recuperate the losses fast. More often than not the result is totally opposite and traders lose much more.

3. Do not revenge trade. Your trades will be emotionally base and that is never a good idea.

4. Always use proper money management. Bad money management is the number one cause that novice traders wash out.

4. Stick with your trading system. Many novice traders quit trading after a number of consecutive losses and they do not benefit from consecutive wins once the tide turns around.

“My plan of trading was sound enough and won oftener than it lost.  If I had stuck to it, I’d have been right perhaps as often as 7 out of 10 times.”  — Jesse Livermor

 

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