To The Moon

Let’s face it, nobody wants to lose. If you can find someone enjoy losing, you win! Losses are an inevitable part of trading. With experience, traders will learn how to accept them and actually gather useful lessons from them.

Face the music

Some interesting points to note:

Traders don't need to put all their focus into their win/loss ratio, as you can loss more trades then you win and still be a successful trader.

Always Treat Losses As A Learning Experience

There are a number of ways you can use trading losses to improve your trading like implementing stop loss orders, analysing each loss and using a trading journal

When traders learn how to handle losses in trading, they can begin to develop a better approach to developing and executing strategies. It's not unusual for both new and experienced traders to make mistakes in trading but not using those losses to adapt and reposition yourself in the markets is a missed opportunity.

A balancing act in trading risk management 

What Is The Win/Loss Ratio In Trading?

Let us first start with the win/loss ratio. This is the number of winning trades divided by losing trades. For example, a trader who has 80 profitable trades out of 100, would have a win/loss ratio of 80%.

However, it would be wrong to purely focus on that number and achieve a high ratio. For example, a long-term trader might have a win/loss ratio of only 30%, but because they make significantly more profits on the winning trades than what is being lost on the unsuccessful trades, they still end up being a successful trader.

With scalpers, it is different. As they are chasing small movements in the markets, the risk/reward ratio is lower, and there is not much potential for realising a huge profit in a single trade. Nevertheless, even scalpers don't need a perfect win/loss ratio to be profitable.

Traders should accept losses as part of the business, and instead of trying to fight them, they should try to learn from those events.

Whether a trader is completely new to trading or in the markets for years or decades, they will have negative trades and positive ones.

As many traders would say, you learn more about trading when you take a loss, rather than when you make a winning trade. This is because a trading loss makes you focus and analyse what went wrong.

Rest, reset, restart

How To Use Losses To Improve Your Trading

Like other things in life, traders can always treat losses as a learning experience. The key is to accept that losses are part of trading. 

It is not easy to accept and it may take time, but the sooner you realise losses are inevitable in trading and come up with a positive way of learning from them, the better off you'll be.

The best way to deal with a big trading loss is to take a small break. Consider your strategy and your position size before jumping back in. When you do decide you are ready, start small. Getting back into the winning ways even with small position sizes is a good way to build confidence and realign your focus.

Mark D. Cook, one of the best technical traders in the world, once said:

"The true winner is the one who perseveres. The race is a marathon and not a sprint. Recognition that all humans fall short of perfect is the first step to the trek to knowing yourself and knowing your limitations.”

Cut losses fast, don't hold & hope!

On a practical level, there are some ways you can turn trading losses into jump-off points to improve your trading. Let’s have a look at some of them in part 2 of this series! 💪😉

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