Today, I wanted to take a minute to talk about something that is absolutely critical for anyone hoping to have long term success as a trader.
Let me start with a short example…
Just recently, a reader named Troy sent me a message with a screenshot of a trade he’d taken (it was based on one of the strategies available on my site).
He had lost the trade and asked me what he had done wrong…
So I took a look at the screenshot and went back to the charts to investigate a bit. After a pretty thorough look at the setup I responded and said he had done nothing wrong.
His response was pure shock. In fact, he seemed annoyed at me. How could he have done nothing wrong and still lost the trade?
Well, it happens all the time. Losing trades are part of being a trader. They’re even a critical part of being a winning trader.
In fact, it’s the ability to look at a losing trade and determine if a mistake was made or if it was a good trade that simply didn’t work out that often separates the winners from the losers.
Bad traders start making adjustments based on one losing trade. The market spiked down to stop them out before going in their direction, for instance, so they decide they must need to change their stop loss going forward.
Decisions based on one instance is about as illogical as it gets…
It’s like seeing someone drive a car straight through a red stoplight and not get hit and then deciding since they happened to not get hit, you are no longer going to stop at red lights.
That would be insane. Yet traders do it all the time. They think one trade is grounds to make changes to their approach.
This is one of the reasons SO many traders are bouncing around from system to system, strategy to strategy, guru to guru, product to product, etc. and neverbecoming successful.
Trust me, if you are looking for something that, when done right, always works trading is NOT for you (I wouldn’t recommend golf either). That’s just not the way it works.
Yes, sometimes mistakes are made and those are the type of execution errors you need to clean up in order to hone your way into a profitable approach…
But you will never get there if you bail on your plan every time you lose a trade. You have to assess a trade’s outcome logically and determine if it was a good trade that did not work out or a bad trade.
Then you siphon out bad trades–NOT losing trades.
Once you do that, you are on the path to a profitable approach. And along that path, you’ll find lots more losers.
Even the perfect trade can be a losing one 😉