We can talk about banking winning trades all day long – a fun and exciting topic. But how about losing? That’s a subject we tend avoid, as if it’s going to jinx us. Well, not only should we talk about them, but we should embrace trading losses. Here’s why.
Losses are part of life
No matter who you are, you will suffer big losses – a loved one, a job – and small ones – your car keys, your wallet. Some of you will lose on Sunday when your team doesn’t win the Super Bowl. And some of you lost in the past few weeks when your team didn’t advance to the Super Bowl.
We experience many emotions when we experience losses, foremost among them grief and anger. If we can’t move forward from the loss, we will carry that burden for the rest of our lives.
Of course, losing money on a trade pales in comparison to losing a loved one. But when traders and investors get mired in their trading losses, they lose opportunities to make winning trades.
Embrace trading losses
Trading losses happen all the time. I experience them and you do as well. It is the bounce back that matters here. You have to accept the loss so you can move onto the next trade, because you know what? That next trade might be the winner you were looking for last time. If you’re not ready at the precise moment, you will miss out.
I highly recommend Mark Douglas’s book, “Trading in the Zone,” which is one of my favorites AND covers the four fears we have around trading. One of those fears is fear of taking a loss. He explains that no one should be worried about this fear. Instead, he says we should embrace trading losses. Like making any mistake, we need to learn from it. When you use a loss as a learning opportunity, you will become a better and smarter trader.
I have written multiple times about the trading mistakes I’ve made. And yes, they have made me a much better trader.
So the next time you’re faced with a situation that is difficult (or impossible) to correct, wave the white flag of surrender. Sell the trade at a loss, accept it, and get yourself ready for the next one. There will always be a next one!
