TheRiskBlog

It is common knowledge that sometimes we lose and sometimes we win as traders. That’s what happens and the only important thing is the result at the end. Did you earn more or did you lose more?

Let’s talk about losing. It’s not what you want, and we all hate it (I’m sure you do, at least I do)
But with losing comes a dangerous behaviour. The idea of winning your money back. Here is why it is a bad idea trying to get back your money right after losing it. Most of the time you will end up losing more.

For example

According to your risk management you can only risk a maximum of 300$ a day daytrading. You start trading and it gets pretty volatile, so your first trade closes out with a loss of 120$. You can take that loss. Mentally and physically (reason being it is within your risk management). But after a while your stock comes back and you think “Ok, I had the right idea about that stock. I just moved to early.” So you buy in again. The Stock rises and your portfolio begins to look good, but so far you only made 90$ back. The problem is, your loss was 120$. So you are not willing to get out of this trade until it shows “real” profit, that means more than 120$.
As the market moves your way again you make another trade in order to reach the “winning zone” faster.
But as I said, this is a volatile market. And soon the market and your positions lose steam. You could now stop out of your gains, but you want to get back the money you lost. All of it!
So you don’t think about stopping until you reach 120$+.

What can I say…? You already know what happens.  It starts in the red. Trying to get something back from the market is always a bad strategy, because the market didn’t take your money and it can’t give it back to you. It’s you who lost that money. But the good news is that you actually can make money.
Your perspective regarding the market is very important as far as your trading is concerned.

My recommendation for you:

First:
Do not try to make back the money as soon as possible, it never works. Just see the next trade as a new trade with a neutral outcome. As long as the outcome is positive, you can take that profit, if it gets negative you have to be very careful and stop out the trade quickly.With a trading perspective like this you won’t get emotionally involved with your trades.

Second:
Stop, when you think that today is not a good day for trading! It doesn’t matter if it’s really a bad day for trading or if your feeling tells you that today is not good. Don’t trade. Wait and see and don’t trade just because you think you miss chances. There are so many chances everyday, you won’t miss much if you lose one day or a couple of hours.

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