Successful Traders Master The Art of Losing

One of the most dificult tasks for a trader, is to understand that losing is part of trading.  Unfortunately, it takes some time to warm up to the idea and even more time to realize what losing is all about.

The sooner the attitude to losing is changed, the better  a trader becomes. The art of losing consist in keeping the losses smaller than profit, or profit more times than the losses.

It is nearly impossible, specially for a daily trader, to have a winning record of hundred percent. There are a few main things that a trader has to know when trading. One is, that an strategy no always work. And if does works, it could be badly executed.

Another thing that minimizes losses, it is no holding onto bad trades. It is desirable that once you enter a position, the price moves in the right direction of your choice.  It is bad practice letting a trade run in the opposite direction with losses.  There isn’t any point in holding a position with loses. It is better to buy back at a lower price than waiting for the price to return to the entry point and then go higher.

It could take weeks before the price return to the initial entry point. An experienced trader would have closed the position and go some where else or re enter at a lower price. A trader that closes early a losing position will have better chance  of profiting when the price recover.

Also, losses can be reduced by waiting for the right opportunity to enter a trade, rather than be constantly trading.  Trading constantly can cause tiredness and increases the chances for mistakes. But in the other hand, it is good to trade in regular basis to keep up to date with the fluctuations and information of your selected trading instrument.

Keep your expectation realistic. If you are convinced that the price of XYZ will go from $20 to $35 you would also have to expect that it wont be in a straight line. It is better to profit than waiting to long. The circumstance surrounding your trading instrument could change and your profit can be reduced or end up with a loss.

At the end, practice and experience are the best lesson to reduce losses and increase winning trades.

 

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