When was the last time you stayed in a losing trade? You probably said to yourself: \u201cThe stock is against me now but it\u2019ll come back!\u201d\u2014and then you got stopped out. Sigh. We\u2019ve all been there, and it happens especially with new traders, who eventually realize that all the hoping, wishing, and praying won’t help to avoid taking the loss. And the worst is when you have a very good trade on\u2014technicals look good, you can see the buyer\/seller on the tape, it\u2019s the right time of the day, you’re on the right side of the trend, the market started moving in your favor\u2014and yet the trade doesn\u2019t work out. It happens, and the only thing you can do is to get out, accept it, and move on! But the good news is that you\u2019re not alone, because even some of the best traders will succumb to their emotions.<\/p>\n
As Dr. Andrew Menaker says in his post below, \u201cI Cannot Hit My Losers\u201d, you\u2019ve got to learn how to lose well. It also helps to remember that you are in business for yourself, which is another way of saying that to have losing trades is part of being a trader. Think of it as the cost of doing business. The trick here is to depersonalize those losses. Don\u2019t make them personal. Accept the loss and move on. Fretting will not help (though analyzing why a trade didn\u2019t work certainly will).<\/p>\n
There\u2019s another element that can\u2019t be said too often: control your risk. Bella discusses this in the post below, \u201cFirst Control Your Risk.\u201d You\u2019ll also like Gman\u2019s post, where he analyzes a specific trade and how he avoided a big loss. He also offers some excellent advice for those times when a break in a stock is not clean and what you should do about it.<\/p>\n
Happy reading\u2014and trading!<\/p>\n
If you feel you lack the trading skills and discipline to get out of your losing trades, let us know. You can always contact us for training.<\/p>\n
Mike Bellafiore<\/p>\n
mbellafiore@smbcap.com<\/p>\n