When was the last time you got a paper cut? Do you remember? I’d bet you struggle to come up with the time and place. Exactly, you forgot. Keep your losses like paper cuts so you can forget about them and continue working. Paper cut losses are simple, effective and essential.

Novice intraday traders need to understand the importance of taking paper cut losses. They will protect your account and psyche from damage. Small losses allow you to focus on the next trade without influence from the previous trade. One Good Trade to the next One Good Trade.

Paper cut losses can prevent the common pitfalls of revenge trading or trading your P&L from creeping into your trading day. Losses that more resemble hitting your thumb with a hammer are much tougher to forget. Taking losses is an everyday occurrence in the life of an active pro day trader, they must not trigger, self sabotage stress induced decision making.

The great thing about paper cuts are that they hurt for a second, but the pain ends quickly and you can get right back to work. As your tape reading and foundational trading skills improve your personal definition of a paper cut loss will evolve. What may start as a simple small, dollar loss position sizing strategy should progress into trading bigger positions with a better ability to keep them and derive more profit from them while maintaining a paper cut mentality.

Jeff Davis