The third, fourth and fifth trade all had a lost of about $250, each. That's a total of $750 net loss, not even factoring in commissions and other expenses.
At this point, what would you do? Accept the $750 loss as a lesson and never trade again? Start changing your strategy because it is obviously not working?
Perhaps even start listening to what other people have to say and blindly follow their analysis. Even worse, start taking trades that you would never have taken or risk excessive amount of capital all in the hopes of recouping that lost.
You are now thinking to yourself, "I should never have started trading, now I've lost money that could still be in the bank!"
Guess what, I stuck to my trading plan, ignored the losses (to the best of my ability!) and just took each trade as it came. In the following weeks, I made more than my losses to have a decent amount of profit.
So what am I driving at?
Stick To A Trading Plan
Find a strategy that works for you and has been shown to be profitable in the long run and stick to it! Don't change it at the first sign of trouble. You'll never be able to make money like that. Sure, you could tweak the strategy after reviewing it periodically but definitely not from trade to trade.
Emotionless Trading
I have to admit, this was my biggest problem when I started. I always took trades that I would normally avoid after losing on a previous trade. I can honestly tell you, it only made me lose more money and it's a vicious cycle.
You should view each losing trade as an opportunity to learn from your mistakes. What went wrong? Did you miss out something? Note everything down so that you will not commit the same mistake twice.
If you can adopt this emotionless trading mentality, I'm sure your results will improve.
Discipline
You have to be disciplined! I'm not saying that you can read this and immediately start being a better trader, or even make more money. But you have to make it part of your trading philosophy. It takes patience to wait for the proper trade setup, to wait for a better opportunity to enter the market. Wait for high probability trades which I will discuss in the future so stay tuned for that!
Also, have the discipline to do your homework. I didn't learn all this overnight, it took me a lot of reading and up till now, I'm still learning. It never stops! So if you want to be better at this, you have to invest time and effort into doing your homework.
Risk Management
A good trader will know how much to risk and how to minimise it. You cannot eliminate risk, but you can mitigate it. Managing your risk is more important than profits. A few mistakes could easily wipe out all the profits that you have been accumulating for the past days, weeks, even months.
There will be times when your gut feeling tells you risk more because the setup is perfect. But always stick to what your risk management plan allows you to. If your plan tells you that the trade is beyond your risk appetite, then wait for a better day.
Remember, not making money beats losing money any time!
What do you think makes a good trader? Leave your thoughts in the comments section.
As always, happy trading.
Cheers.
Emotionless Trading
I have to admit, this was my biggest problem when I started. I always took trades that I would normally avoid after losing on a previous trade. I can honestly tell you, it only made me lose more money and it's a vicious cycle.
You should view each losing trade as an opportunity to learn from your mistakes. What went wrong? Did you miss out something? Note everything down so that you will not commit the same mistake twice.
If you can adopt this emotionless trading mentality, I'm sure your results will improve.
Discipline
You have to be disciplined! I'm not saying that you can read this and immediately start being a better trader, or even make more money. But you have to make it part of your trading philosophy. It takes patience to wait for the proper trade setup, to wait for a better opportunity to enter the market. Wait for high probability trades which I will discuss in the future so stay tuned for that!
Also, have the discipline to do your homework. I didn't learn all this overnight, it took me a lot of reading and up till now, I'm still learning. It never stops! So if you want to be better at this, you have to invest time and effort into doing your homework.
Risk Management
A good trader will know how much to risk and how to minimise it. You cannot eliminate risk, but you can mitigate it. Managing your risk is more important than profits. A few mistakes could easily wipe out all the profits that you have been accumulating for the past days, weeks, even months.
There will be times when your gut feeling tells you risk more because the setup is perfect. But always stick to what your risk management plan allows you to. If your plan tells you that the trade is beyond your risk appetite, then wait for a better day.
Remember, not making money beats losing money any time!
What do you think makes a good trader? Leave your thoughts in the comments section.
As always, happy trading.
Cheers.
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