When was the last time you stayed in a losing trade? You probably said to yourself: “The stock is against me now but it’ll come back!”—and then you got stopped out. Sigh. We’ve all been there, and it happens especially with new traders, who eventually realize that all the hoping, wishing, and praying won’t help to avoid taking the loss. And the worst is when you have a very good trade on—technicals look good, you can see the buyer/seller on the tape, it’s the right time of the day, you’re on the right side of the trend, the market started moving in your favor—and yet the trade doesn’t work out. It happens, and the only thing you can do is to get out, accept it, and move on! But the good news is that you’re not alone, because even some of the best traders will succumb to their emotions.
As Dr. Andrew Menaker says in his post below, “I Cannot Hit My Losers”, you’ve got to learn how to lose well. It also helps to remember that you are in business for yourself, which is another way of saying that to have losing trades is part of being a trader. Think of it as the cost of doing business. The trick here is to depersonalize those losses. Don’t make them personal. Accept the loss and move on. Fretting will not help (though analyzing why a trade didn’t work certainly will).
There’s another element that can’t be said too often: control your risk. Bella discusses this in the post below, “First Control Your Risk.” You’ll also like Gman’s post, where he analyzes a specific trade and how he avoided a big loss. He also offers some excellent advice for those times when a break in a stock is not clean and what you should do about it.
Happy reading—and trading!
If you feel you lack the trading skills and discipline to get out of your losing trades, let us know. You can always contact us for training.
Mike Bellafiore
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