Today, I want to bring up a common concern among all traders, new and seasoned…
That’s the fear of losing money.
Last Thursday, the markets slumped, mainly due to disappointing earnings from some Big Tech names, and naturally, those kinds of days can make traders nervous.
And StocksToTrade recently asked our Twitter followers this question: “Which psychological hurdle do you still battle with the most in trading?”
By the way, you can follow us on Twitter here.
The fear of losing money came in second place, behind impatience in trading, which I addressed last week.
That’s why I thought now was a good time to discuss this fear, why it’s reasonable, and how to manage it.
It’s a simple fact: we all want to win. That’s just human nature.
We want to win in sports, at work, at sports… and in trading. But you should never forget that losing is fundamental to the trading game.
Losses are baked into every process in life, and learning to deal with them separates the average from the elite.
The same applies to trading. You will have losses. It’s mathematically impossible that you won’t. So, if you don’t have a choice, you might as well learn how to handle them.
Table of Contents
Tough Talk
Today, we’re diving into a topic no one really wants to discuss: losing. It’s uncomfortable and no one enjoys it.
And in today’s world what makes that feeling worse is social media. Winning is everywhere! Notice that you barely ever see anyone posting when they lose money.
All you see is the big gains, the “I crushed it!” comments, with sound effects and photos of their sports cars, boats, vacations, etc.
Honestly, it’s exhausting.
But I’m here for real talk because that’s my job as a trading mentor. I’m here to discuss the tough topics so you can survive, keep trading, and grow your account, despite the losses.
If your mindset is set on never losing, when that inevitable trade turns against you, it’s going to sting.
You’ll get stubborn. And when you’re stubborn, that small, manageable loss—something that’s easy to recover from, like a $100 loss—can snowball into a $1,000 or even $10,000 loss…
All because you refused to admit you were wrong. Refusing to lose gracefully is a great way to derail your trading career.
Stop Focusing on Win Rates
Here’s the truth: some of the best day traders out there win only about 50% to 70% of the time. And 70% is an exceptional win rate.
And if you’re new and think you’re going to beat that, good luck! You need a reality check.
The average win rate of Jim Simons, the founder of hedge fund Renaissance Technologies, was 66%!
And he was one of the best traders in the world! When he died this year (RIP), his net worth was worth $31.4 billion.
Source
Accept that Losing Is Normal
So, keep your expectations grounded.
Losing is normal, and here’s the biggest takeaway: the faster you can accept that you’re going to be wrong sometimes, the faster you’ll become a consistent and profitable trader.
How?
Let’s talk about what I call the “Rule of Five.”
Imagine you’re a small-account trader, and you lose $100 on four days of the week. That’s a total of $400 down. Then, on Friday, you make $500.
Guess what? You’re green on the week, despite winning only one out of five trades. Sure, no one trades to make just $100 a week, but this example illustrates the principle.
So the next time you’re staring at a losing trade and thinking about holding on just a little longer, remember that. Don’t let a manageable loss, like $100, spiral into a disaster, and potentially destroy your trading account.
Besides changing your mindset about losing money and losing in general, your success also depends on having a great trading platform—one that offers charting, stock screeners, technical indicators, and more.
My top pick is StocksToTrade. It has all of the above, and I use it every day. It also offers a selection of add-on alert services so you can stay ahead of the curve.
Grab your 14-day StocksToTrade trial today — it’s only $7!
My Final Thoughts…
Being willing to lose and acknowledge that you were wrong sets successful traders apart from the crowd. You have to take the loss in stride and quickly move on to the next opportunity.
If you let it eat away at you, eventually, you’ll lose the whole game. The market doesn’t care how hurt you are about a trade not working out.
Do you want to learn more about trading psychology, improve your trading skills, and learn new ones? Join our StocksToTrade community.
We have tons of free live webinars that run all day and offer trading tips and tricks, info on our Oracle trading system, and other valuable training.
And if you’re looking for more trading mentorship as well as stock ideas, subscribe to my StocksToTrade Advisory service.
Every STT Advisory member gets a monthly newsletter with a list of my top picks, three weekly videos with my watchlists, bonus reports, and more.
Sign up for StocksToTrade Advisory right here!
Have a great day, everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade