Winners and Losers: It’s Not The Trades It’s The Traders…
ByWins and Losses are familiar to us all, the pain of loss and the joy of a win. There is no confusion there.
With trading losses, the majority of the time the shortfall comes from the trader and no the trading strategy.
Yes, that probably means you. But, today I’m going to talk about how to stop losing money and become a winning trader. Before you even place an order, deciding where to buy or sell is always connected to where you place your stop-loss order.
If you want to talk about position entry, it should include a comprehensive explanation of stops. Why do so many investors fail to take advantage of stop losses? It you are one of those not using them, listen up, you’ll want to know this. Stop losses can spell the difference between meager late retirement and on time comfortable retirement.
Plan and place stops equals your plan to win, and you are prepared to have a loss but make it through to continue trading. A look at the traders psychology of loss taking is in order here.
All professional traders understand they must know where they are getting out before they get in. They have to know ahead of time what a wrong trade looks like so they can exit it quickly. This is a rudimentary fundamental that EVERY professional trader knows the answer to.
Can you answer the following questions?
1.) When should you stay on board and when should you bail out?
2.) Is there a set point that indicated to you to sell losing stocks?
3.) Do you have a rule of when to move your stop to break-even?
Are you unable to answer these questions? You aren’t alone. This indicated that you should be establishing some rules, especially when going to short stocks, but trading rules don’t mean a thing if they aren’t used. This is why we need to have a frank discussion about why you aren’t managing your risks in a hands on way, like a pro should.
There are 2 base reasons why Investors won’t take a loss:
1. Admit they are wrong? No Way!
A realized loss is a great big unavoidable acknowledgment of wrongness. For many traders, this is just too painful to admit. It’s interpreted as an allegory for a total life failure or feeds a persistent, negative self-image.
They personalize the loss and experience emotional pain. Many traders prefer to remain in denial instead of acknowledging their losses are causing them pain. This type of trader often has to lose it all before he begins to change (or gives up trading).
2. The losing position is too big relative to their overall portfolio value so they can’t afford take the loss.
The loss is a real loss, it is not solely on paper, the stock/bond option has the value of the quote, even if you don’t see it.
Both of these examples are a form of self-delusion that millions of investors, both large and small, suffer from. Just look at AIG, Merrill Lynch, WAMU, Lehman, etc. … and you can take comfort in the fact that self-delusion is no respecter of income bracket or social standing.
If this article is making you uncomfortable or bringing up feelings of anger or powerlessness, then that’s a good sign. It means you have enough self-awareness to change.
The winning trader uses a different strategy from the losing trader by regarding the pain from the loss in an impersonal way. They use the loss as a sign that something went wrong with their approach, or their execution, but NOT that something is wrong with them.
Winning traders separate who they are from what they do. They know, or learn, that their trading faults lies in their approach or their skill level but not in their fundamental worth as a person. The pain they feel is quickly transmuted into motivation, which fuels their desire and determination to become a better trader.
You choose what to do with the losses, grow from the pain or give in and quit. Using the emotions for positive growth is what is important, not the fact that you had a loss.
Stick with my proven ETF Trend Trading system and make winning a habit. Study; ask questions and monitor your position size relative to your portfolio and you will end up on the winning side more often than not.
“Proper Stops and risks” are main points in my program and reminding you constantly of that is an important part of my mentorship program. Once you have gone through my program completely and thoroughly understand it, you will still want me to tell you “Don’t move your stop” and “Be sure to take profits when my system tells you to, not earlier or later” In fact the mentorship program is probably valued higher than the course itself.
Learn how it’s very possible to make 6% per month in your investment accounts using etf trading! “Big A” is a recognized expert in the world of etf trading system & reveals etf secrets that have been kept under wraps by hedge traders for years. Give him your email & get a free report & webinar today!
