The horrors of losses

I've noticed a disturbing commonality among unsuccessful traders. Mainly, that losses are 'no big deal' and 'part of the game'.

While taking small losses can be a valid part of a well oiled, robust and highly successful professional trading system... the idea that losses are 'acceptable' seems to be distorted in the minds of unsuccessful traders. New traders are conditioned almost from day one by books and by peers to view losses as just part of the game. While this may technically be true, the message is misinterpreted by new (and many old) traders to be... that losses are much less of a big deal than they actually are.

The net result is that traders do not make every conceivable effort to AVOID losses in the first place. Traders typically skip this step entirely and jump right into the next step which is 'limiting' losses. New traders are not taught that losses are the LAST thing you want and that you should move heaven and earth to develop a trading system that is not constantly pummeled by losses, if at all possible. If it's not possible to avoid losses, fine. Of course. Deal with it. Factor it in. But if you take the attitude from day one that losses are horrific (rather than 'just part of the game') and should be avoided at every turn if possible... you will be more keen, more cautious, in developing a system that makes avoiding losses in the first place a priority.

Ultimately what happens to new traders is that they grow accustomed to losses. Many even cherish their big losses and trot them out in conversations as proof that they 'have what it takes' and have 'paid their dues' and are now ready to make some real money. But when the next horrific loss comes it's like the bucket of ice cold water that is dumped on their heads does not shock them. It actually excites and refreshes them. They rage at God, then immediately shake it off and write another Visa check to refund their accounts. Their attitude about losses is unhealthy and self defeating. Losses are horrible. Take them ONLY if you must. Even if losses are 'part of the game' don't look at them that way. A trader should do everything in his power to rig up a trading system that avoids losses whenever possible and keeps any losses that do sneak through to the bare minimum.

Thoughts and comments welcome.


I do not see the point to discuss psychology of the people who do not know what they are doing. Some sort of masochism...

Why they still trading?

Because they were told that anyone can do it.. just read this book, or listen to this mentor.. and you will develop an edge..

Edge my a$$....

Instead, some one should tell him: "Buddy, you know nothing, and you probably never will know enough to trade better than most. And while you are like everybody else, you are a sucker... like everybody else... Keep that in mind !"
 
This is most likely one of few posts I have to disagree with you, although you specialize in Crude Oil and I mainly trade ES, but every system I have designed in past four years have been number one priority of not losing often and not caring as much to making profits. Matter of fact, I have worked hard with ES to do 25-55% of trades to be plus one tick because of averaging down based on weekly stats. LOL, I don't move stops at all in ES, I don't use them in any of the indexes, Crude Oil you have to as it runs fast. I have spent first 26 years designing methods based on making profits, those are now automated, but I like not losing often, much less stress. But as a scalper, trading an hour and done, could rack up 25 trades. Even the options system been working on for two years getting very close to what I can live. But my long term models normally lose 75-85% of the futures trades and still do ok.

I think young traders don't have the knowledge of what it takes to reduce losses and control one's "hoggish" tendencies to go for homerun trades than take consistent smaller profits in ES. Crude oil is very much a Support/Resistance market, so bigger gains can be had but of course at a cost of more smaller losses cause much more slop in day session. There are always trade offs.

People are different kinds of traders, so I guess it depends. For example, I trade some longer term trends. I expect some losses. With such a system, twisting yourself into a pretzel trying not to lose results in cutting off winners too early. You are better off getting out when your trend is broken and finding something else that's trending. And yes, you end up holding stuff when it has gone way up and you feel crazy for doing it. However, you have to obey the trends. Otherwise you are not trading a system--you are trying to predict the market based on your so-called gut feeling, something that no one can do. I believe that people who claim they can "feel" a market are unconsciously using some observable signals.

Other people may trade different types of systems. Maybe those work differently.
 
Losses are part of the game but what matters is how a trader ends the day, week, month or year. The result should be @ profit and if not at profit...the trader needs to fix (revise) whatever is preventing he/she from being profitable. Simply, losses should be minimized and encourage us to perform better.

Just as important, if someone is consistently getting losses or consistently losing money by the end of the day, week, month or year...they should stop trading and revise their trade strategy or revise their trading plan or revise their attitude (perceptions) about trading. This revision may involve the trade strategy or money management or discipline or trading environment or perception about trading and any other variable that has an impact on our trading results.

If the revision process fails...they need to conclude trading is not for them and find something else.

Those that encourage losing traders to keep trading with real money instead of encouraging them to take a step back to fix things (trade strategy, trading plan or themselves) often have hidden agendas or their just selfish because it makes them feel good about their own performance. Losing traders should just stop, do the revision process instead of listening to anonymous folks online that encourages losers to be losers.
 
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People are different kinds of traders, so I guess it depends. For example, I trade some longer term trends. I expect some losses. With such a system, twisting yourself into a pretzel trying not to lose results in cutting off winners too early. You are better off getting out when your trend is broken and finding something else that's trending. And yes, you end up holding stuff when it has gone way up and you feel crazy for doing it. However, you have to obey the trends. Otherwise you are not trading a system--you are trying to predict the market based on your so-called gut feeling, something that no one can do. I believe that people who claim they can "feel" a market are unconsciously using some observable signals.

Other people may trade different types of systems. Maybe those work differently.
I trade one minute bars and some times down to 20 second when volatility extremely high, I also trade long term using decade/yearly/monthly/weekly/daily/two minute, four years ago I discovered a concept based on not losing, so I design all methods that rotate this concept, do I have losses, you bet I do and sometimes quite large. Did it reduce holding period on longer term methods? No, it actually forces to stay in longer, some commodity trades been in over five years, have rollovers. And I average down now on all timeframes, and no, I will not own the world some day. Happy making what I make and steady growth. You don't have to obey trends, you obey your Trading Plan. So if you are trading a decade trend, you think there be many change of trends?
 
Here's a question to help me to avoid having losses lead to over or revenge trading. Let's say during the day I have decided if I have 2 winning trades at the start of when I am trading in a row, I will quit for the day.

Therefore that leads me to this if I have 2 losing trades in a row, I will quit for the day.

The objective being that on my losing days I will not end up having an overall bigger account loss than my account profit on my winning days.

Now on to the questions:

A) Let's say I have 1 winning trade and 1 BE trade. Do I trade another 2 trades, do I trade just 1 more trade? Or just stop trading for the day.

B) Now let's say I did 2 trades, and I end up overall BE minus commissions, do I trade another 2 trades, or just 1 trade. Or just stop trading for the day.
 
Here's a question to help me to avoid having losses lead to over or revenge trading. Let's say during the day I have decided if I have 2 winning trades at the start of when I am trading in a row, I will quit for the day.

Therefore that leads me to this if I have 2 losing trades in a row, I will quit for the day.

The objective being that on my losing days I will not end up having an overall bigger account loss than my account profit on my winning days.

Now on to the questions:

A) Let's say I have 1 winning trade and 1 BE trade. Do I trade another 2 trades, do I trade just 1 more trade? Or just stop trading for the day.

B) Now let's say I did 2 trades, and I end up overall BE minus commissions, do I trade another 2 trades, or just 1 trade. Or just stop trading for the day.
sounds more like some kind of religious, superstitious numerology, than a trading plan. What is magic about the number 2?
 
sounds more like some kind of religious, superstitious numerology, than a trading plan. What is magic about the number 2?


There is nothing magic about the number 2. My goal is to use stats to correctly determine the number of trades that will prevent a winning day's profit to be less amt than a losing day's losses.
 
I have to agree with some of the people on here and say that I also hate the losses. I mean they are pretty much the worst. I always get worried that I'm going to start losing too much money and then I won't have any left. That is why I started using demo accounts so that I could help myself out. They honestly helped me out a lot in the long run. I have to say that I'm very happy with them because they are essentially a virtual trading platform where you can buy and sell various currencies without risking real money. In providing this service, Forex brokers replicate live online Forex trading within a test environment where no trade actually gets sent to the market.
 
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