I'm a non-profitable retail trader who is starting to turn the corner (close to breakeven). How does everyone else seem to deal with losses? I noticed they have a significant negative impact on my trading psyche and future trading results. I am beginning to believe that this is the biggest remaining barrier to me getting "over the hump." Thanks for everyone's responses ahead of time.
The Scratch The scratch is probably the best idea to come down the pike since digital charts. It functions much like a microchip implant, flicking you into auto mode when you're about to do or have just done something stupid. Not only when events go against you but when they even LOOK like they're going to go against you, you can scratch and defuse the whole situation, leaving you clean and unsullied with time to breathe and calm down and think and elbow fear in the gut before he has a chance to mess with you. The most obvious and frequent use of the scratch is the precipitous exit from a trade. I say "precipitous" because the exit will almost certainly be too soon. However, when the heart stops and the brain freezes, "too soon" is not on the table. What is absolutely paramount is getting out and getting out fast. A common scratch occurs immediately after an entry. The trade doesn't go the way you expected it to go, but instead of falling back into the warm and welcoming arms of hope or giving in to that gut-wrenching feeling when you see yourself living in a box under the bridge, just get out. Instantly. Without even thinking about it. Just get out. Scratch it. What have you got to lose? A tick? A point? Just get out. And if the trade ends up going in the direction you had expected it to, so what? You can deal with that if and when the opportunity presents itself. In the meantime, you're out. You're clean. You're calm. You're fearless. Your vision is beginning to clear. And you had the discipline to do what needed to be done. Another common scratch occurs the first time price moves against you. This may happen in seconds, immediately after the entry, as discussed above. But it may not happen for what seems like minutes, though it can be much less, particularly if you've managed to grab onto a rocket. At some point, this rocket will begin to run out of fuel and sputter and retrace a bit. How much room are you willing to give it? How much CAN you give it before your bowels begin to loosen? Regardless of whether or not you objectively should exit this trade, it should be scratched as soon as you begin to fear the outcome. Immediately. Without thinking about it. Whatever happens after can be addressed after. One cannot go on like this, of course. While scratching ensures minimal losses, if any, it also ensures that your profits will be far less than they would be if only you had let them run. But maximizing profits is not the point of scratching. Its purpose is to reprogram you into understanding at a behavioral level that you are in complete charge of whatever happens to you. That you decide when and how to enter and when and how to exit. Once you've reached this state, fear is an afterthought, if one thinks about it at all. You'll find all sorts of opportunities to scratch, the number depending on how much reprogramming you need, i.e., how screwed up you are. But one common opportunity which to me is essential to the trader's growth but which few people even think about has to do with concentration and focus. Trading requires that you pay attention, but it must be attention of the right kind. You've planned, you've prepared, you've reviewed the decisions which have been and have yet to be made, you're psyched, you're ready to go. An opportunity presents itself, you take advantage of it, and then everything goes to hell. Instead of concentrating and focusing on price and what it's doing and where and how, you're thinking about your trade and whether or not it's in profit and if so how much and how much danger it's in and should you give it room or scratch and what about that loss you took and can this trade bring you back to breakeven or maybe a little profit besides or maybe more than just a little and there you are back where you started, fear sitting on your chest. Though it's difficult to pull off, scratching when one's mind begins to wander is an excellent, straightforward, and efficient way of not only smacking yourself for wandering off onto the wrong thoughtcourse but of bringing you back to the straight and narrow. It's so effective, in fact, that even the mere thought of scratching may be enough to bring you back into focusing on what you ought to be focusing on – price behavior – rather than on your trade and its status. And if you've been giving it the old college try and doing everything right but fatigue begins to set in and you're losing focus not because you're thinking of the wrong things but because you're just so damn tired, then stop. Exit and stop. The market will be here tomorrow (unless it's Friday). So will you be if you don't kill yourself with overwork. Remember: the best plan is of no use if one is afraid to follow it. Scratch when you have to, for as long as you have to. Nobody is going to know if you don't tell them. And when you get to the point where you can trade emotionlessly, you'll be better able to detect fear in others by the way they're moving and reacting to price and to use that knowledge to your advantage. All's fair. more . . .
First of all, losses are inevitable. Experiencing losses doesn't mean you automatically suck at trading. If you have a system in place, where your wins exceed your losses...then just: ...if you don't have a system in place...then make one -- otherwise, you're just gambling. Think about it.
Just make sure you don't let a single or series of losses take you out of the game. Protect your trading capital. been there done that.
You learn to accept them without any guilt or remorse as they are just part of the game. If you can't reprogram your mind to this level then you will never make it as a trader. I suggest you read this until you know it like the back of your hand. http://www.goodreads.com/book/show/1170470.The_Disciplined_Trader
I keep money back, when i have a stupid day and take a big hit, i merely refund that amount and pretend it didnt happen, stops me revenge trading. Obviously i transfer back when i make back some or most of the loss. Talking 20% down day, so maybe 10 losers in a row, not a single loser, there nothing.