For a seasoned trader, the only thing that’s important about a loss is how to technically rationalize it.
A single losing trade shouldn’t impact the rest of your trades. You simply want to make sure that there’s no collateral damage and then move on. That being the case, there’s no difference to me if I lose money on my 1st trade of the day or the 3rd. Taking losses on trades is just the cost of doing business sometimes. It’s as basic as brushing your teeth in the morning.
New traders tend to look at losing trades a bit differently. The first trade of the day can make or break them mentally for the rest of the session. We’ve all been there. The market opens and the first click of the mouse echoes through your office. The anticipation of a move in your direction is euphoric. But this is trading, and sometimes things don’t work out in your favor (allegedly).
So what happens when you inevitably find yourself on the wrong side of a trade? The walls start closing in. Slowly, a self-imposed dark cloud forms over you and you’re mentally checked out. At the end of the day, you review your preparation notes from the previous night and see that 4/5 names worked out. However, the one trade you took was the grim reaper.
As a seasoned trader, I’ve learned that there is no dark cloud. Take a deep breath and relax. This is trading — the ultimate game of failure. Unlike baseball, batting .300 won’t put you in the hall of fame. Instead, it’ll land you in the poor house — a place we’d all like to avoid. If you can identify 5 plays and 4 of them work properly, you’re on the right track. You don’t need to overhaul the system, just toughen up a bit mentally. We’ve all been where you are now — just a dollar and a dream, baby.
The key is to have a short memory and believe in your process. Don’t have a process? There’s a kid who grew up in Brooklyn that can help you (allegedly).
Losses will happen. Whether it’s the 1st trade or the 8th, take them for what they are: just the cost of doing business.