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.
