Wins and Losses are familiar to us all, the pain of loss and the joy of a win. There is no confusion there.
However in considering the loss of a trade, the strategy is usually sound, it is the trader that came up short.
Uh huh… that is most likely you! However, help is on the way…. I am going to discuss ways to stop financial losses, and begin being a winner at the trades. Prior to placing orders, you have to decide where your stop loss order will be placed.
You can’t delve into the topic of position entry thoroughly without speaking of stops. The question is, “Why are stop losses used by so few investors?” If not using stops is a weakness for you then you want this info. This info could mean the difference between on time retirement with a fat nest egg or just ‘getting by’ at a later retirement date.
By planning and placing stops you plan to win, but prepare to take losses and still live to trade another day. So we need to look at the trader psychology around taking losses.
A professional trader needs to know where the exit point in their trades are before they start trading. Having a visual of a wrong trade is key so a trader can know when to get out fast. This is a basic knowledge that all pro traders need to have.
What are the answers to these questions?
1.) How do you know if you should sit tight or cut your losses?
2.) When a stock is losing, do you have a guide that lets you know when to sell?
3.) Is there a set point for you to break-even by moving your stop?
If you can’t answer these questions, you’re not alone. And what it means is that you need to establish some rules for yourself, especially when you go to short stocks. But, all the trading rules in the world are meaningless if you don’t use them. That’s why you and I need to “talk turkey” about what’s really going on with you when you refuse to manage your risk in a proactive and professional way.
There are 2 base reasons why Investors won’t take a loss:
1. Admit they are wrong? No Way!
For many traders a realized loss is a huge admittance of being wrong and that is just too hurtful to acknowledge. To them it is linked to being a failure at life and their self image is directly affected by this perceived failure.
A trader like this experiences real pain from the loss, and would rather deny it than fess up to the fact that it is giving them the pain. Quite often it requires a total loss before he can begin to change. To quit trading is the only other alternative.
2. Their portfolio, because of its size, can take a hit that big.
But in reality, there’s no such thing as just a paper loss. The stock (bond, option) is worth what it’s quoted and the loss exists whether you realize it or not.
Both of these examples are a form of self-delusion that millions of investors, both large and small, suffer from. Just look at AIG, Merrill Lynch, WAMU, Lehman, etc. … and you can take comfort in the fact that self-delusion is no respecter of income bracket or social standing.
Are you feeling uncomfortable with what I am saying?… or powerless, or angry? Good! That is a sign that you are capable of making the changes you need to.
The winning trader uses a different strategy from the losing trader by regarding the pain from the loss in an impersonal way. They use the loss as a sign that something went wrong with their approach, or their execution, but NOT that something is wrong with them.
Winning traders separate who they are from what they do. They know, or learn, that their trading faults lies in their approach or their skill level but not in their fundamental worth as a person. The pain they feel is quickly transmuted into motivation, which fuels their desire and determination to become a better trader.
You choose what to do with the losses, grow from the pain or give in and quit. Using the emotions for positive growth is what is important, not the fact that you had a loss.
Stick with my proven ETF Trend Trading system and make winning a habit. Study; ask questions and monitor your position size relative to your portfolio and you will end up on the winning side more often than not.
The continued reminders about “proper stops and risks” is one of the main points in the 1 year mentorship program. When you have a full understanding of my system, it will be important for you to hear me say “Don’t move your stop” and “Take your profits at the time the system says to not before or not after”. The course itself is top notch, but the mentorship is valued more highly among the majority of my students.
Learn how it’s very possible to make 6% per month in your investment accounts using etf trend trading! “Big A” is a recognized expert in the world of etf trend trading system & reveals trading & investment secrets that have been kept under wraps by hedge traders for years. Get his free report & webinar today!
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