KEEPING LOSSES SECRET AND PROFIT PUBLIC
A large trading loss can not only have a huge dent financially but emotionally as well.
Secretly Losing Money!
Here is what traders do not understand they treat with loss secretly. They do not share the loss with the mentors or even in public. Most of the time during conversation only profitable trades are discussed and shared. Emotionally when a trader makes a trading loss he goes to a different zone altogether. Most of the traders avoid discussing the loss and hence it is a rare thing that they learn from their mistakes.
Now another set of traders gets into Revenge mode with the market which is disastrous.
Most traders would agree the very first loss we make and we are ready to get back the money quicker and faster which never happens.
TYPES OF LOSSES
Losses every trader make broadly falls into two categories.
Statistical Assumption loss is one of them. Every trade before entered most of the traders calculate the risk to reward ratio. Most of the traders follow a risk to reward of 1:3 or 1:4. This is a statistical assumption that at least 60% of the trade would be profitable and a loss would be around other 40% of the trade. The loss you make when it falls into the statistical assumption then it is not worrying. Loss based on statistical assumption is unavoidable.
Now there is the second type of loss which most of the first-time traders experience. This loss is due to lack of planning before trading. Even the other way round planning before the trade but failing to implement the plan. Ignoring your trading plan or not planning at all.
It is very important that you classify your loss and then understanding how to treat them. Most of the time when the losses are of the second type of nature they tend to hide which is a very natural thing to do since they are aware that they did not follow their trading plan.
TREATING THE LOSSES
Traders main objective should be to understand the type of loss classify it. And move ahead without the confidence eroding. One should be prepared to deal with losses. Even most of the exceptional trading systems make the loss. Statistical assumption loss should lead you to improve your statistical effectiveness. Most of the beginner trader are always looking for a class apart trading system. In the entire process, they fail to understand and implement the most important aspect that the trading loss and loss management.
Now trading losses because of bad attitude to trade. Now this time it’s completely different scenario. Now important things about this section of the trader is that do not realize that the trades are going bad because of bad attitude. Their attitude weighs so badly on their decision making that they do not realize that their trading losses are because of the same. They most of the time assume that trading loss is happening is a part of probability.
This is a major setback since sooner or later they are going to lose all the money very fast. Only then they would start introspecting about what went wrong with their trades. Halt your trading activity and try to understand why you are losing your control and discipline. Such a behavior paralyzes your mind and does not allow you to take the right decision.
Now best way is to cut off yourself from trading everytime you have lost 25% of the portfolio in very short time. Because to even recover that 25% loss you have to now earn 40% profit which makes it a little tougher. Do not leave the market completely perhaps just leave your trading alone. You cannot perfect your trade at first instance. It is a continuous process of improvement. Now everyone has certain emotional triggers. Try to find out what are your emotional trigger that makes you take the wrong decision.
Another method is to maintain a notebook where you maintain all your trades. And all other aspects of trading. You can consider the loss you have made as tuition fee and keep moving ahead to trade further. Now in such a situation, one can easily learn that it is easy to learn from others mistakes rather than learning from their own mistakes.
Nevertheless, the impact of implementing these corrections the time and other resources you spend in making these adjustments. You might not see more profit with these corrections but definitely, your capital is not going to erode.
Have you experienced this earlier? With this fundamental change have you corrected your strategy? Would you recommend this to a newbie Trader? Let’s hear your thoughts in the comments below!
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