Accept Losses

One of the most important quality of a successful trader is the ability to accept losses and to take them promptly. Perhaps the single greatest downfall of all traders is the inability to take a loss when it should be taken. Losses have a nasty habit of becoming worse rather better. Unless they are taken when they should be , the results will not be to your liking.

Although it is easier on one hand for a day trader to take loss than a positional trader (since a loss must be accepted by the end of the trading day ) , it is still the downfall of many futures traders who are unwilling to accept the loss when it is a reasonable one. The good futures trader must have the ability to take a loss when the time to take that loss is right. What’s right is dictated by particular trading system or  risk management technique you are using. From my experience is perhaps percent or more of all losses are due to not taken losses when they are small or relatively small or when they should be taken.

I can certainly speak from experience when I say that my largest loss resulted from the fact that I refused to take the loss when the time was right . I allowed a $500 loss to turn into a $5000 loss. Fortunately that was the first and last time I was guilty of that serious transgression.

Here are some suggestions as to how to improve your ability to take loses when they should be taken :

1. Formulate your stop loss rules specifically whether they relate to  system or specific risk amount and type or write your rules in large print and place a hard copy near your trading place and refer then frequently.

2.Makee the commitment to accept completely your next ten losses as dictated by your system . Once you have done this , the behavior will become habitual and losses will be easier to accept.

3.If you trade with a full service broker make him aware that of where your stop loss will be and ask him to remind you.

4. Place your stop loss as soon as your entry order has been filled.

Source : Market Masters written by Jake Bernstein.