There is no opportunity without risk; thus, learning to truly accept risk is the first steps to trading freedom. We teach that once we are in a trade, we employ "trade management" strategies for purposes of taking profits or protective stops. Trading involves speculation, which, by definition, involves risk; therefore, accepting "loss" is a necessary part of trading.
Our objective is to help you approach the market in a disciplined, objective approach, with a high focus on managing risk (and loss), to help you overcome the tremendous hurdles during your quest to become a profitable self directed trader. A trader refusing to accept loss is as ridiculous as a pilot not accepting turbulence during flight, and should consider not trading.
Any winning strategy necessitates the ability to lose properly. It is the capability to deal with, and "make good" of, one's losses that enables winning traders to keep a positive mental attitude. It also enables them to progress and effectively maintain their winning ways.
Losing properly is not easy and therefore requires great skill. You need to be able to learn from your mistakes. Ask yourself if the trade actually met the criteria of your trading plan. If it did, then could you have averted the loss, or was it a good setup that was consistent with your strategies? If you made an error in judgment make sure that you learn from it.
The discipline involved with losing properly has to do with taking the loss at the right time. Did you sell at an intelligent time, with your stop placed just beneath support? Or, did you not take your "intelligently" placed stop and sell at a lower price than you should have? Discipline is also necessary when preparing for the potential loss. Make sure that your stop allows for a level of risk that you can stomach, and is compatible with your strategy. This will help you to be comfortable with "losing" properly.
Seasoning has much to do with maintaining a positive mental attitude. Seasoned traders do not let their losses "get them down." They understand that the loss may actually be a "friend," as it creates an opportunity to learn from. They apply the knowledge and use it to improve their trading and maintain a winning attitude while accepting and brushing off the loss.
Come join us in our 3 live interactive trading rooms where you can see us in action using the Pristine Method and the proper tools to trade with on a daily basis. You can register for a free trial if you have not done so in the past 6 months.
I look forward to seeing you soon.
Instructor and Traders Coach
Pristine Capital Holdings, Inc.
Pristine - A trading style often imitated, But NEVER matched
If you have any questions on this Lesson of the Week (NYSE:LOW) or any other past edition, please send to email@example.com as we would be happy to hear from you.