Very hard time taking loss:(
- Thread starter ksonsinc
- Start date
You always have to know how to take the loss... that's one of the cornerstones of trading futures.
Adding to a loser gives you a false sense of security as it improves your accuracy aka being right and this makes for easier psychological trading.
Unfortunately.....
The above does not come without a hefty price, big losses in relation to most of your winners.
Winning for the most part on small size, losing for the most part on big size.
You are much better off accepting the reality as soon as possible, that you were wrong, and securing the protection of capital by realizing a small loss.
When you average down you re-enter at a better price of your intended direction except the following detrimental actions occur.
1) Eventhough you are improving price you are dragging a previous loss that's becoming even bigger
2) You are increasing your risk, sometimes exponentially.
It is better to stop the damage and improve price by re-entering vs not stopping the damage and barely improving price while increasing risk.
Try it, it will help you take losses more responsibly.
Losses are part of the business, they are inevitable, don't try to evade them, it's impossible.
However, what is very much possible, is avoid big losses, but only if you do not add to losers/don't take stops.
Unfortunately.....
The above does not come without a hefty price, big losses in relation to most of your winners.
Winning for the most part on small size, losing for the most part on big size.
You are much better off accepting the reality as soon as possible, that you were wrong, and securing the protection of capital by realizing a small loss.
When you average down you re-enter at a better price of your intended direction except the following detrimental actions occur.
1) Eventhough you are improving price you are dragging a previous loss that's becoming even bigger
2) You are increasing your risk, sometimes exponentially.
It is better to stop the damage and improve price by re-entering vs not stopping the damage and barely improving price while increasing risk.
Try it, it will help you take losses more responsibly.
Losses are part of the business, they are inevitable, don't try to evade them, it's impossible.
However, what is very much possible, is avoid big losses, but only if you do not add to losers/don't take stops.
Taking losses for me isn't really the question. In fact I see a pretty big problem in the concept of setting a predetermined stop loss point.
Regardless of whether a position is moving for or against you, the trade should be continually managed. Part of that management is the determination of current target probabilities. If a position is showing a nice profit, how do you determine when to take that profit? My answer is that it is the same method used to determine when to take a loss.
Conveniently, this is also the same method used when deciding whether to open the position in the first place. It is a simple matter of ignoring the fact that you already have a position there, and then performing your regular opportunity analysis.
Let's say you are long 1 ES and it is 5-points against you. Forget that you have that position and analyze the situation for a potential opening order. Would you open a Long 1 ES position at the current price? If yes, then hold the one you've got until the answer to that question is 'No'. Would you open a Long 2 ES at current price? If yes, add 1 contract to your position. If no to both questions, then cut losses or determine if you would instead be interested in opening a short position.
If this method is losing money, then it isn't adding to losers that is the problem. Your buy/sell analysis needs improvement. Really, adding to losers randomly is the exact same thing as randomly opening the initial trade.
Regardless of whether a position is moving for or against you, the trade should be continually managed. Part of that management is the determination of current target probabilities. If a position is showing a nice profit, how do you determine when to take that profit? My answer is that it is the same method used to determine when to take a loss.
Conveniently, this is also the same method used when deciding whether to open the position in the first place. It is a simple matter of ignoring the fact that you already have a position there, and then performing your regular opportunity analysis.
Let's say you are long 1 ES and it is 5-points against you. Forget that you have that position and analyze the situation for a potential opening order. Would you open a Long 1 ES position at the current price? If yes, then hold the one you've got until the answer to that question is 'No'. Would you open a Long 2 ES at current price? If yes, add 1 contract to your position. If no to both questions, then cut losses or determine if you would instead be interested in opening a short position.
If this method is losing money, then it isn't adding to losers that is the problem. Your buy/sell analysis needs improvement. Really, adding to losers randomly is the exact same thing as randomly opening the initial trade.
I am a newbie here and am a part time trader. I follow the equities, commodities and the Forex markets, with a view to trading and investing in them. My limited experience in trading has taught me that the most important aspect in successful trading is to develop the right mindset. I have started reading the thread from the very first post, and i know it will take some to complete them all, but i intend to slog it out.
Happy trading to all,
Dan
Happy trading to all,
Dan