Enhancing Trader Performance: Learning How to Lose

*****David Blair, The Crosshairs Trader, is a blogger/trader/educator who does a wonderful job of sharing research on elite performance and how it relates to trading. Below is his latest post for the SMB trading community.***** — Editor’s Note

What a wonderful experience it is to win. We all like to win. We want to be associated with winners and be on the winning team. In sports, winners are rewarded with scholarships and huge contracts, leading to fame, fortune, and prestige. In business, the winners develop products used by the masses. In the publishing world, the winners write the best sellers that turn into movie blockbusters.

However, what we often fail to consider is the losing that accompanies the winning. Even the greatest sports figures lose—and lose often. A PGA golfer is doing well if he wins one to two tournaments a year out of the 25 or so played. The slugger is successful if he gets on base three out of ten times at bat. The successful entrepreneur has usually failed numerous times before developing the winning product. Some of the greatest authors, past and present, were met with numerous rejections before their manuscript became a blockbuster. What truly separates the winners from the losers is not that winners never lose but that winners learn from losing and losers do not. In learning from losing, the winners learn that losing is part of the game. Losing, while difficult to accept, can be a great place to start the learning process.

It is impossible to win all the time. This is no less the case in trading as it is in sports, business ventures, publishing, etc. But in learning how to lose, the trader can create a winning strategy that accepts losing as a key component to winning. Traders who consistently lose and eventually fail at the speculative game do so because they approach trading as a “win at all cost” venture, devoting all their time and energy to finding the next great indicator or chart pattern that will keep them from losing. The successful golfer is not successful because he found the perfect golf club but because he learned from losing. The successful trader is not successful because he found the winning indicator but because he learned how best to lose by managing the uncertainty of never knowing when the next big winner will surface among all the losers that came before it.

If you want to be a winner, learn how to lose. The following will help you enhance your understanding, and appreciation of, the losing side of the game.

“Awards can be powerful motivators, but nonstop recognition does not inspire children to succeed. Instead, it can cause them to underachieve.” (Losing Is Good For You)

“A growth mindset leads people to seek challenges and learning, to value effort, and to persist effectively in the face of obstacles.” (Stanford Education)

“Whenever we lose we tend to get really emotional about the loss and even personalize it.” (5 Great Lessons From Losing)

“The stark reality is that expertise in any performance field is the exception, not the rule, requiring dedicated practice and training.” (Traders Log)

“Failure can make us feel passive and helpless and lead us to believe that we’ll never succeed no matter what we do or try. However compelling such feelings are, they are no more than perceptual distortions—tricks our minds play on us after experiencing failure.” (Huffington Post)

“The truth is that failure and making mistakes is a necessary part of success and it cannot be avoided.” (Pick The Brain)

“If I find a cow turd on my front steps, I’m not satisfied knowing that I’ll be mentally prepared to find some future cow turd. I want to shovel that turd onto my garden and hope the cow returns every week so I never have to buy fertilizer again. Failure is a resource that can be managed.” (Scott Adams on The Secret of Success: Failure)

“A firm must allow you to lose money if you are doing all the things necessary to succeed and improve.” (The Failure Rate of a Proprietary Trader)

David Blair


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