Two Ways To Lose

I’ve had many days where I lost much more than I should have on a trade (or trades), and I absolutely hated myself after that.

Therefore, I have made a conscious decision to lose as little as is feasible on every trade I make.

The way I see it, if we want to make it really simple, there are basically just two ways to lose a trade:

  1. Lose small: Lose the amount equal to or less than your stop-loss.
  2. Lose big: Hope that the trade will rebound and when it doesn’t, you end up losing way more than your intended stop-loss amount.

As I trade momentum on the 5 minute timeframe, it usually becomes quite apparent after 5 or 10 minutes if my trade is going to work out.

And if it looks like it’s not going to work out, I’m happy to just get out of the trade for a small loss.

Let’s put it this way: If you’re going to lose on a trade anyway, would you rather lose $300 or $80?

Of course, there are times when I get out of the trade and it changes course and ends up being a winning trade. Yes, that has definitely happened before, and it doesn’t feel good when that happens.

However, (a) it doesn’t happen all that often, and (b) I would much rather have lost $80 on a trade that might have ended up being a winner, than lose $300 on a trade that eventually didn’t pan out.

It plays on your emotions, and I have realised that small losses are always better for my psyche than big losses.

One of my big mottos in day trading is “Let your losses be as small as possible”.

Nothing wrong with taking a very small loss on a trade and then realising you aborted too early. At least you’re still preserving your account, and there will always be other better opportunities down the line.

It’s your choice. You decide what works best for you.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s