the mistake 99% of traders make is thinking about money at all. money and P&L is an incredibly emotional subject. the objective in trading is to remain unemotional as only then can one make rational decisions. I spent many years in both the chicago pits and on the screen and there was a single ability that the handful of guys that were truly great possessed and that was the ability to take a loser and be unaffected emotionally. I can't tell you how many guys I knew including established traders that would have a loser and for whatever reason (money, ego) be unable emotionally to cut it loose. when that happens not only is one turning a manageable loser into a P&L disaster/potential blowup but also missing out on the opportunity of the next trade. mastering the skill of being unemotional took my trading to a completely different level. I'll leave you with this thought - THE BEST TRADES I HAVE EVER MADE AS A TRADER WERE LOSERS.
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- Thread starter Datradr
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That statement is illogical. Although I get where you are coming from as if a losing trade teaches a life lesson. Let's not have too many of them though, yes?
This is a vital skill. The ability to kill a trade at a moment's notice, without your mind racing in a million directions.
The moment that trade crosses a certain boundary...kill it. Don't sit there and begin praying to God it will reverse in your favor.
Prior to this setup and approach...it helps greatly to establish a fair set of assumptions and expectations on how you think the future graph will look like.
Know how the rabbit will move. Don't chase it blindly from behind.
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what I am trying to say is don't think of it as a bad outcome. as soon as a trader starts thinking "bad outcome" the negative connotations of that statement carry baggage and make unemotionally pitching a trade that much more difficult. the way I looked at it is if I rationally took a manageable loss that was otherwise 30 seconds away from being a disaster and reversed to capitalize on the move then I was doing exactly what I was supposed to be doing as a professional trader. there is nothing more important in trading then managing one's emotions.
What do you think of it as? You took a trade and preserved your capital by taking a loss then moved on to the next trade. You followed your plan yet you lost the amount you had planned on.
I try not to think of the money. I measure my performance by whether I followed my plan. Each trade has an outcome. Some good some not so good. I attempt to make only good trades regardless of the outcome.