A VERY common theme amongst the email Q&A I get from new and developing traders is the frustration that comes from having a losing trade.
They typically want to know where they went wrong. Or what they should have done better.
Often though… there was NOTHING wrong.
This is not a game of winning every trade.
Trades are not taken because of any belief in certainty; but rather because our assessment of the odds and potential payoff deems them to be worth the risk.
And success comes through managing both winners and losers, such that we profit over a series of trades.
Winners AND losers.
You will get both.
Sometimes they lose:
Sometimes they win:
Sometimes they lose. Sometimes they win.
What if instead of hoping every trade would win, you could be happy with a win rate of just 50%?
You might get slightly more. Or slightly less. That's fine. It's still enough.
Just ensure you work on keeping the average win larger than the average loss.
Hello lance ,
what do you mean by average loss and average win can you tell me how you calculate it
Take a series of trades (20 minimum but ideally more). Add up all the loses and divide by the number of losses. This is your average loss. Add up all the winners and divide by the number of winners. This is your average win.
You are absolutely right MR Beggs. I still have a perfectionist streak but now realize the world is grey, not black and white. This has helped me not get into a funk over one loss etc. ty for your posts i really enjoy their sense
Thanks Pat! 🙂
Hi Mr. Lance,
How many pips is to your usual stoploss.
Stops are dependent upon price action, placed at a location that should not be hit while the trade premise remains valid. So beyond recent swing highs/lows or significant bar highs/lows.
Typically 5-8 ticks though.
(Note: It’s ticks in futures, not pips)
I think your ability to not give a f^@& about being wrong, and instead focusing on not being “bigly” wrong (losing a lot on a trade) is one of your greatest strenghts. It’s so liberating when you don’t care and keep your ego in check.
Thanks for your weekly articles. They are a goldmine of trading, and life, wisdom.
Yes, I think it’s one of the keys to success – not taking an “individual trade” trade perspective, but instead viewing this game across a “series of trades”.
That being said, it’s never as easy as this makes it sound. 🙂
Love this post. End of 2020 I have been more focused on learning from the mistakes I made during my 3 months tradinf forex. Now in 2021, eventhough I have a strikerate of 45% for the first 2 weeks of 2021, for now I was able to 16% of profit. Cutting loss earlier and letting the winners run is the key. However, it might sound easy but for now it’s a constant mental game, but I know that if I keep toward this direction one day it will become “natural”.
Nice work Christopher. This is great. Keep it up.
Learn from mistakes. Study and understand them and find a way to avoid them in future, or minimise their impact.
But also learn from successes. Study them and understand them. And find a way to develop them into standard routines, processes and practices so that they repeat again in future.
Best of luck,