Learn To Take Losses

Save yourself the time and trade butterflys off of 5 minute charts :)


ironchef said:
You sounded just like @padutrader. :p All other day traders on ET also told me to go, at a minimum, 5 minute charts. :D :D

Why? I developed this day trading approach using 1 minute chart by accident and decided to stay with it until I could finish testing. I copy my other post and paste it here for you:

Current approach is still 1 minute, but picking my entry very carefully, make one trade per cycle based on what I learned from @volpri's posts. Less profitable because I don't ride the wave but much higher win rate. Overall profitable and probably more sustainable over a long period?

Next projects: trading 5 minute charts and trading butterflies. So much to do not enough time. :(:banghead:
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ironchef said:
A lot of risk management threads, posts by elite traders on ET and all trading wizards on Schwager's books said learn, practice how to take losses is one of the most important keys to trading success.

However, no one really spelled out exactly what that meant and the steps, processes of learning how to take loss.

Two questions for those willing to answer:

1. What is your definition of the right way to take losses and,

2. how do you practice and learn the how to?

Thank you.
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One of the problems is that our society has indoctrinated us into BS such as “winning is everything.” The consequence is that winners get respect, while being a loser is looked upon as inferior. Most of us bring this baggage into trading, and it can interfere with taking losses.

The second problem is that when we go through the school system, we’re indoctrinated into being “right”, and unfortunately being good at trading has nothing to do with being right.

Can you see the (unconscious) mindfuck caused by the two aforementioned indoctrinations to the average trader???

The consequence is that most people take losses personally, and their ego gets in the way of trading.

There are other factors, such as overconfidence, dangerous framing of losses (e.g., “Loss is not a loss until sell”), plus cognitive biases working against the trader such as the lotto bias (illusion of control), illusory correlations, selective perception, etc.

You don’t need to know all the above; all you need to know is that all successful traders learned not to take losses personally; they fully accepted that it is a necessary part of the business.


Regarding your two questions:

Q1) What is your definition of the right way to take losses?

  • It’s a personal thing, everyone trades differently, but I’d suggest to always place a stop under a logical level (e.g., S/R, swing point, supply/demand zone, or whatever TA you use) where buyers/sellers would no longer be in control (where you know that you’re “wrong” and that you need to protect your arse).

  • This way your SL will be in the most logical place with the smallest Maximum Adverse Excursion (MAE).

  • If the stop level is hit, just get out, don't overthink it, it need to be automatic reaction !!!

  • If you’re intraday trader and you don’t trust yourself, put the stop in simultaneously when you place entry order.


Q2) How do you practice and learn how to?

  • Fully accept the loss before you put on the trade !!! (Fully feel the pain before you enter the trade).

  • If you’re intraday trader, or put the sell order in when you enter. (if holding overnight, put the sell order in for during market hours only)

  • It’s not rocket science; just click the sell button, and do a happy dance, congratulate yourself that you’ve saved your arse.

  • Create an empowering metaphor to support you mentally.
 
PPC said:
One of the problems is that our society has indoctrinated us into BS such as “winning is everything.” The consequence is that winners get respect, while being a loser is looked upon as inferior. Most of us bring this baggage into trading, and it can interfere with taking losses.

The second problem is that when we go through the school system, we’re indoctrinated into being “right”, and unfortunately being good at trading has nothing to do with being right.

Can you see the (unconscious) mindfuck caused by the two aforementioned indoctrinations to the average trader???

The consequence is that most people take losses personally, and their ego gets in the way of trading.

There are other factors, such as overconfidence, dangerous framing of losses (e.g., “Loss is not a loss until sell”), plus cognitive biases working against the trader such as the lotto bias (illusion of control), illusory correlations, selective perception, etc.

You don’t need to know all the above; all you need to know is that all successful traders learned not to take losses personally; they fully accepted that it is a necessary part of the business.


Regarding your two questions:

Q1) What is your definition of the right way to take losses?

  • It’s a personal thing, everyone trades differently, but I’d suggest to always place a stop under a logical level (e.g., S/R, swing point, supply/demand zone, or whatever TA you use) where buyers/sellers would no longer be in control (where you know that you’re “wrong” and that you need to protect your arse).

  • This way your SL will be in the most logical place with the smallest Maximum Adverse Excursion (MAE).

  • If the stop level is hit, just get out, don't overthink it, it need to be automatic reaction !!!

  • If you’re intraday trader and you don’t trust yourself, put the stop in simultaneously when you place entry order.


Q2) How do you practice and learn how to?

  • Fully accept the loss before you put on the trade !!! (Fully feel the pain before you enter the trade).

  • If you’re intraday trader, or put the sell order in when you enter. (if holding overnight, put the sell order in for during market hours only)

  • It’s not rocket science; just click the sell button, and do a happy dance, congratulate yourself that you’ve saved your arse.

  • Create an empowering metaphor to support you mentally.
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Thank you for your very thoughtful responses and coaching. :thumbsup:
 
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ironchef said:
Looks like Mr turtle and Mr Tao went to the same school. :thumbsup::thumbsup::thumbsup:

I better read the book and join the Best Loser club. :D:D:D
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%%
CATCHY TITLE, but really/ best Wise Worker$ Win
That writer[Best Loser W......... LOL] actually admitted he did plenty of overtime @ JPM.
Like the song says\ WE ARE Destined To Win /Jessy D @ BBC, London United Kingdom.
ALL sorts of business things you can do;
2 fudge pop tarts have about 72 % RDA sugar %%, in 2 ,+ 6 per pack=hog ratio LOL.
Like Dave Ramsey says ''always look @ ratios '' LOL:D:D:D:D:D:D:D,:cool::cool:
IF I eat any of those cut, may or may not , cut off the non fudge edge LOL\ that so called '' enriched '' edge LOL of the pop tart=white flour turns to sugar inside /so really more sugar than 72%:caution::caution:
 
schizo said:
Is this one of them vegan propositions? I'm a PE..... v.......:)

As they say, it's not what you use, it's how you use it. 1 mi..... chart is fine and it's great for quick scalps.
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%%
LOL
I seldom use a 1 mi, even a good volume stock like IP + not a stock tip, not enough volume for me to tell much LOL
WOULD you catch a fallin' star\
YOU know how people are \
YOU KNOW , as it crashes to the ground\
they dont liked it when its DOWN/LOL
John A Song . > 2,077,777 vV hits . I thought you liked milk choc/that's animal juice:caution::caution:
 
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