Today's topic is an exciting one because I will be talking about something that many new and aspiring traders hate most, and that's because many of them only aspire to win. On the other hand, seasoned traders know very well that winning or losing is part of the game. In fact, ask a professional trader and he'll tell you that losing in one (or a few) trade has no impact or influence over his longer term results.
For traders to succeed, you need to understand how to lose before you can win. Because losing (in trading) is not just about acknowledging and understanding it at the surface, instead, it is about accepting it and embracing it from within. Once you have accepted that, you can take the appropriate action to become an even better trader. Above and beyond that, you will be able to accept a losing trade so gracefully that winning and losing becomes as easy as a toss of a coin.
With that, I hope explore this topic a little more and, hopefully, you too can enjoy the ups and downs of the financial market with flair and grace.
As Random as a Toss of a Coin
As an advocate of price action, I am constantly looking for those patterns that I believe would give me a high probability set up in the market. In fact, that is as far as I go because that is the only thing that is within my control - with respect to analysis. I said it before and I'll say it again, I can only trade what I see and everything else in the market is just like a toss of a coin. I get it right on some occasions and I get it wrong on other occasions. In fact, my win to lose ratio is only about 50:50 which is pretty much what you'll get when tossing a coin.
Yes, the market is indeed Random. While I continue to find a market bias, I manage my expectations and accept that I will never know, with certainty, what will happen next. And that's the key because my job as a trader is not to predict the future. Instead, I am only here to trade using a predefined set of rules and I do so mechanically.
However, what many forget is that Technical Analysis is only 1/3 of my trading edge. The rest of my success boils down to risk management, money management and discipline - and that leads me to my next point.
It's not about Losing (Or Winning), It's about Being Disciplined
If I made great effort to sell a car or to creatively write a good book, than I can declare that I have contributed to the success of it. However, this is not the case in trading. Because the market is random, who am I to declare that I am a winner or a loser when I have no control over the winning or losing of my trade? In fact, I would go to the extent where I dare say that every winning trade that I have was out of luck or the lack of it (when I lose).
If you truly accept that you cannot control your winners or losers, let's turn our attention back to what we can control - and that is ourselves. As a trader, the only thing that you can most definitely control is (1) your choice to follow your rules and (2) your decision to execute it accordingly. That's right, being a successful trader is about being disciplined because, weather you like it or not, you do have complete freedom and choice to decide if you want to follow your rules or not.
The great thing is this, once you have decided that to follow your trading rules and accept that losing is nothing more than a toss of coin, that is also when you have decided to become a disciplined trader. In all honesty, that moment will be where most traders make their turning point - turning from being an amateur trader into a confident and mature trader. From there onwards, success is just a stone throw away.
Learning to Let Go
Lastly, learning to lose in trading is also about learning from the losing trades. You see, when I started to trade, I made tones of mistakes. While some of the trades were winners and some were losers, my net balance was down. After awhile, it did not take a rocket scientist to realise something was wrong.
My point is this, in the long run, if you fail to follow your rules and you keep losing like I did (when I started), you will come to a realisation that this was just a waste of time and money. The urge to trade, ego and cool factor of becoming a trader just don't exist any more. You will also learn that the market will always be right no matter what you think and no matter what your bias may be. So what else can you do?
For me, the biggest lesson I took away after losing for a long time was that all I had to do was to let go (the need to be right) and flow with the market. Since the market is always right, it's really irrelevant what I think will happen. So, I learnt to put my effort in seeking where the market is flowing. I learnt to know when to trade and when not to trade. Other lessons include learning to find the market makers, trading with the trend and, more importantly, finding the price levels where I am wrong and then manage my stops accordingly.
Conclusion
In case you haven't realise, the lessons today is not about losing (or winning). Instead, it's about the indirect learning that I took away after losing a long time. Of course, I still have losing trades occasionally but that's usually small losses or break even trades (some of the trades are posted here on TYE). But if you are still reading this now, then you would have realised that winning or losing is just like a toss of a coin.
Lastly, what about you? What were the lessons you learnt? Make sure to take some time from trading to ask yourself about the indirect lessons. Challenge yourself and once you do, you'll find a dozen of new lessons that you can learn.
For traders to succeed, you need to understand how to lose before you can win. Because losing (in trading) is not just about acknowledging and understanding it at the surface, instead, it is about accepting it and embracing it from within. Once you have accepted that, you can take the appropriate action to become an even better trader. Above and beyond that, you will be able to accept a losing trade so gracefully that winning and losing becomes as easy as a toss of a coin.
With that, I hope explore this topic a little more and, hopefully, you too can enjoy the ups and downs of the financial market with flair and grace.
As Random as a Toss of a Coin
As an advocate of price action, I am constantly looking for those patterns that I believe would give me a high probability set up in the market. In fact, that is as far as I go because that is the only thing that is within my control - with respect to analysis. I said it before and I'll say it again, I can only trade what I see and everything else in the market is just like a toss of a coin. I get it right on some occasions and I get it wrong on other occasions. In fact, my win to lose ratio is only about 50:50 which is pretty much what you'll get when tossing a coin.
Yes, the market is indeed Random. While I continue to find a market bias, I manage my expectations and accept that I will never know, with certainty, what will happen next. And that's the key because my job as a trader is not to predict the future. Instead, I am only here to trade using a predefined set of rules and I do so mechanically.
However, what many forget is that Technical Analysis is only 1/3 of my trading edge. The rest of my success boils down to risk management, money management and discipline - and that leads me to my next point.
It's not about Losing (Or Winning), It's about Being Disciplined
If I made great effort to sell a car or to creatively write a good book, than I can declare that I have contributed to the success of it. However, this is not the case in trading. Because the market is random, who am I to declare that I am a winner or a loser when I have no control over the winning or losing of my trade? In fact, I would go to the extent where I dare say that every winning trade that I have was out of luck or the lack of it (when I lose).
If you truly accept that you cannot control your winners or losers, let's turn our attention back to what we can control - and that is ourselves. As a trader, the only thing that you can most definitely control is (1) your choice to follow your rules and (2) your decision to execute it accordingly. That's right, being a successful trader is about being disciplined because, weather you like it or not, you do have complete freedom and choice to decide if you want to follow your rules or not.
The great thing is this, once you have decided that to follow your trading rules and accept that losing is nothing more than a toss of coin, that is also when you have decided to become a disciplined trader. In all honesty, that moment will be where most traders make their turning point - turning from being an amateur trader into a confident and mature trader. From there onwards, success is just a stone throw away.
Learning to Let Go
Lastly, learning to lose in trading is also about learning from the losing trades. You see, when I started to trade, I made tones of mistakes. While some of the trades were winners and some were losers, my net balance was down. After awhile, it did not take a rocket scientist to realise something was wrong.
My point is this, in the long run, if you fail to follow your rules and you keep losing like I did (when I started), you will come to a realisation that this was just a waste of time and money. The urge to trade, ego and cool factor of becoming a trader just don't exist any more. You will also learn that the market will always be right no matter what you think and no matter what your bias may be. So what else can you do?
For me, the biggest lesson I took away after losing for a long time was that all I had to do was to let go (the need to be right) and flow with the market. Since the market is always right, it's really irrelevant what I think will happen. So, I learnt to put my effort in seeking where the market is flowing. I learnt to know when to trade and when not to trade. Other lessons include learning to find the market makers, trading with the trend and, more importantly, finding the price levels where I am wrong and then manage my stops accordingly.
Conclusion
In case you haven't realise, the lessons today is not about losing (or winning). Instead, it's about the indirect learning that I took away after losing a long time. Of course, I still have losing trades occasionally but that's usually small losses or break even trades (some of the trades are posted here on TYE). But if you are still reading this now, then you would have realised that winning or losing is just like a toss of a coin.
Lastly, what about you? What were the lessons you learnt? Make sure to take some time from trading to ask yourself about the indirect lessons. Challenge yourself and once you do, you'll find a dozen of new lessons that you can learn.
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