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I ♥ Losses…Really?

1/31/2018

The founders of Precision Trading Labs had a common trading teacher & mentor. Something he said to us on various occasions has always stuck with us, and made us better traders: “Learn to love your losses.”
“WTF?!” you say? Here’s the 411:
His comment was a shorthand way of saying to have a solid risk management plan, and following it would make us better and calmer traders for it because we’ll know in advance that all of our losses will be small, manageable and already planned for:

We’ll take small, paper-cut losses, and won’t experience account-destroying setbacks that land us in the trading ICU.
On any trade we’ll be able to admit without emotion and hesitation that either we were wrong about the setup, or that even if we “were right”, it’s one of those trades that’s “supposed to fail.” (even if you’re a superstar trader that gets 2:1, 3:1 or better on your average trade and are right 75% of the time, that means you’re “supposed” to be wrong the other 25%).
We’ll have actual stops in our setups, not mental stops that often find a way of being highly malleable (please note we’re not suggesting anyone is wrong for using mental stops. If you’re successful using them, that’s great)
We won’t move our stop to give the trade a chance to recover (hope is NOT tactic), and instead of taking a $300 loss on the trade we turn it into a $900 debacle because we duped ourselves into thinking “it will come back.”
We won’t convince ourselves that dollar-cost-averaging on the fly, a.k.a. adding to a loser, is a great intra-trade tactic, again, turning a one-unit loss into a two-bagger because we couldn’t admit we were wrong (again, if that works for someone, great). And to be clear, we’re not talking about long-term swing trading or investing, where averaging-in and building a position makes sense.

So, for your short-term trading, learn to love your losses!

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"Mitch was very thorough with everything and helped me for a strategy for my budget" -- Jack Z

"If it wasn't for Mitch, I wouldn't be trading today. I'm applying everything he taught me and I'm making money" -- Bob

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Giving You The Strategy and Tactics You Need To Respond To Any Market Condition

I ♥ Losses…Really?

The Top 5 Mistakes New Traders Make

Author

Archives

Categories

Precision Trading Labs HQ

"Mitch was very thorough with everything and helped me for a strategy for my budget" -- Jack Z"If it wasn't for Mitch, I wouldn't be trading today. I'm applying everything he taught me and I'm making money" -- Bob

Subscribe

"Mitch was very thorough with everything and helped me for a strategy for my budget" -- Jack Z

"If it wasn't for Mitch, I wouldn't be trading today. I'm applying everything he taught me and I'm making money" -- Bob