Learn to lose gracefully
Losing a trade or being wrong about the market direction doesn’t mean you’re inferior in any way. It just means that the market didn’t move in your favor this time…there’s no reason to take it personally. Losing is part of being a trader and it’s something you can’t avoid. The more you try to avoid losing trades the more money you will lose because you will begin assigning too much importance to any one trade.
Many traders become fixated on trying to avoid all losing trades. They take losses way too personally. They forget that losing is part of the business of trading and they let every losing trade affect them on a personal level.
As traders, it’s important to understand that even if we see what we think is a ‘perfect’ trade setup and it turns into a loser, we didn’t do anything wrong…we just had a losing trade. It doesn’t mean we suck at trading or we that we aren’t smart enough to “figure it out”, it just means that,that particular instance of your trading edge was a loser.
Trading is the ultimate test of being able to ignore short-term temptations like trading when you shouldn’t and risking more than you should, for the longer-term gain of being a profitable trader at month’s end and year’s end. We need to constantly remind ourselves than any one trade does not dictate our success in the markets, but what does is how consistent our behavior is in the markets, day in and day out. Consistency and patience are what makes traders money over the long-run; these traits are rewarded by the market whilst impulsiveness and unpreparedness are not.
The way that we ignore these short-term emotional trading temptations is to think about the bigger picture, which is that our trading results are measured over a large series of trades, not over a small handful of them. This means that getting upset about being wrong about any one trade is both irrelevant as well as counter-productive to making money in the markets. As traders, we have to learn to ‘lose gracefully’ by simply moving on after a losing trade. By “moving on”, I mean carrying out your trading plan as usual, not reacting after a losing trade, just take it in stride and always remember that you don’t have to be right on every trade to make money in the markets. If you’re trading with a high-probability trading strategy,you can make money over the long-run by sticking to your trading plan and understanding the power of risk reward.