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Accepting Losing Trades

coping with trading lossesAnyone that says they are happy losing money when trading is either lying or is a masochist.

Yet there is a difference between accepting losses as part of the process, and being happy about it. This acceptance mindset is what separates the experienced trader from the novice.

The key sits with your expectations. What you're looking to get out of each trade. Experienced traders have learnt over time to have no expectations. Whereas novice traders often go in with the expectation that their trade is going to be a winner.

One focuses on objectivity whereas the other focuses on emotion.

Now I'm not saying this is a simple mind strategy to apply every time you take a trade. It takes practice. Especially as accepting and being unemotional about a negative experience is the opposite of what your brain is telling you to do.

What we need to do is accept that emotion is part of our being. Yet when trading we need to tap into the objective side of our brain. And it goes both ways as well. We need to step away from the anger and frustration felt when a trade turns against us. Yet we also need to step away from the feeling of euphoria and over confidence when a trade moves in our favour.

Overconfidence and thinking you are the best trader ever can be as destructive as feelings of remorse and anger when a trade turns against you. 

The best thing to do is to keep your trading simple, unemotional and vanilla via a basic 3 step process:

1) Have your position size planned, knowing what your entry level is and where you will be placing your stop.

2) Enter the trade.

3) Immediately lock in your stop position. Then strategically trail it if the trade moves in your favour. 

I also have a 4th step. Turn off your trading platform and stop watching the ticks. A lot of emotion and poor decision making comes from the noise the market makes.

By becoming an End of Day (EOD) trader you are taking away the noise and emotion that can make you erratic and undisciplined.

So have confidence in your trading strategy. Follow it. Take responsibility. Accept your losing trades.

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