The hardest part in trading is dealing with losses. They need to be embraced and appreciated as a chance to keep drawdowns to a minimum. After suffering losses in the past I have found a way to keep them small.
First Rule:
Whenever I suffer a loss that is considerable, I will step away from trading and distract myself. Take a hike, go for a run in the park, watch a movie, call my mother or meet up with friends.
Second Rule:
Looking for a totally different trade the next time around to avoid falling for the same mistake again.
Forcing trades doesn’t work and averaging into a losing position is not solving anything. When setups don’t work, doubling up on them is just going to increase losses to unbearable levels.
After all there is one thing to consider: I have to keep control of my thoughts and actions at all the time. I have the tools and the skills to create winers. That only works if I survive bad trades and keep my powder dry. There is nothing worse than seeing a good trade develop while funds are all tied up in a losing position.
Staying out of marginal trades means to preserve capital for better opportunities.
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