Learning to lose

Posted by:Frank

I never heard of anybody who loves to lose. Most people see losing as 100% bad and honestly, it’s hard not to. I could start with the usual clichés about failure, try to cheer you up but I won’t. Just go on your Facebook or Instagram feed and go read some inspirational quotes, there’s plenty of them out there.

Today, I want to discuss losing in trading. Sadly, it’s inevitable. If you want to be a successful trader, you will have some losing trades. If you don’t wrap your head around this concept, you will suffer a lot.

Truth is, you can’t always be right in the markets. Even if your analysis of fundamentals and technicals is flawless, things can turn around in a madder of seconds. Let’s say that you did all your analysis and you are ready to short bonds. You do it, the trade goes in your direction and you are super happy. All of a sudden, Trump tweets that he launched a missile on North Korea because Kim Jong Un called him “The Fat Rocket Man”. It’s useless to say that your trade is over.

Did you do anything wrong ? Could you have predicted that ? The answer is no. The markets react to what happens and things happen all the time. Now, I know that my example is extreme but I’m sure you get the point.

Learning to lose and move on has always been a big challenge for me. I always feel like a losing trade is the proof that I’m a bad trader, that all my winning trades were just about luck and that I’ll never be able to trade as a job. If that’s your case also, just remember that :

  1. Every trader loses some trades, even the bests ones
  2. A losing trade doesn’t mean that you are a bad trader, you just have to make sure you control the amount of money you lose and not be stubborn by holding a bad trade under water for ever
  3. There is a lesson to learn behind most of the losing trades, don’t miss the opportunity to learn and improve
  4. If your risk reward ratio is 3/1 (make 3 times more money when you win then when you lose), you can be right half of the time and still be profitable

In conclusion, just remember that all champion boxers got punched, all Stanley cup winners lost games and every successful business had bad quarters. The difference between them and the others is the way they got back up and kept pushing trough.