Learn to Love your Losses

[77sigmatrading]

A post published on 77SigmaTrading site:


Do you remember your last loss? If the answer is yes or it is fresh or it is painful. One of the best trader I have ever met one day said to me: I take losses everyday and you know what? I love my losses.

From that day, every single loss i was taking I was thinking to those words. One day I have found what he meant.

The bottom line is that trading is a game of probability, reason why when you have an edge, you should stake with it and never change it until it is not working anymore. Think about it, does a Casino chooses the hand of blackjack to play? The answer is not. The reason lies in the fact that the Casino has an edge and if out of 10 hands the casino wins on 6 and those 6 make up for the loosing ones than you have a money making machine. So if you have an edge stake with it and do not change the way you are trading just because you have a losing strip.

How do you define an edge? An edge is just something that put more probability on your side, it can be a pattern, it can be an indicator, it can be an oscillator. it does not matter how you define your edge the important thing is that it works over a defined number of trades. You know better than anyone else your statistics, you have run your backtesting so you know the maximum drawdown of your system, the profit factor, the average profit per trade. But there is something your maths do not take into count. Yourself.

I’ m writing this post thinking about my trading day, I had a plan, I had a level to trade, I knew where to put my stops but you know what? i had an expectation. Everyday I have an idea, it can be a choppy day, it can be a trending day. I will play the long side or I will play the short side. Those ideas are made through observations. If i have an idea and the market does not confirm my idea I’m usually quick enough to change my mind, because no one knows the market better than the market itself so I cannot be right, I can only be wrong.

Troubles arise when your expectations are so strong that you start moving your stop loss you start reading only the news that follow your idea, you start blaming the market, you start hoping for a positive outcome though you know that the market will never give you the 20 points you need. So where is the problem?

The problem is in your mind, you start reading the market through the lens of your position, you do not listen to the market and you transform a negative day in a very bad day. Think about how many times you turned your initial loss in a very huge loss just because you did not want to take that loss? I tell you something I have learned years ago: “the first loss is the best loss”.

Learn to love your first loss, do not try to re-enter a trade just because the market cleared out your stop loss: Are you doing everything in your best interest (from a trading stand point)? Often the answer will be no, you are just not admitting to be wrong, you do not want to accept your losses cause you will feel a looser. This is what is going on in your mind? Do you agree? So start thinking to losses as the price to play each day. Decide in advance what price you are willing to pay and stay with it. If you will follow this rule you will reach consistency.

There are very few good days in trading but a lot of down days and slightly positive days.

That’s how trading works mate.

 

[NVP]

I fecking hate losses ......lucky I have so few .....

 

[77sigmatrading]

I fecking hate losses ......lucky I have so few .....

Lacky you mate.

 

[Patricia12]

I am happy from my forex trading with some profit and some loss but I am not interested to love losses.

 

[the hare]

I think it was Paul Tudor Jones who said that losses should hurt, and he's probably a better trader than the guy who advised you to love losses.

I don't disagree with the argument, but the holy grail is to achieve indifference, or possibly mild curiosity to the outcome of a trade

 

[The Leopard]

I think it was Paul Tudor Jones who said that losses should hurt, and he's probably a better trader than the guy who advised you to love losses.

I don't disagree with the argument, but the holy grail is to achieve indifference, or possibly mild curiosity to the outcome of a trade

Very true. Very hard to do, but the impact this realisation has on both one's profitability and mental well-being can be staggering.

 

[NVP]

Lacky you mate.

yep ........and the more I research and learn and trade the luckier I get

 

[77sigmatrading]

Researching and learning is everything, you make your luck. For sure Tudor Jones, and a lot of other traders are better than myself, i was sharing with you what I have learned in more than a decade working in the industry. Each one of us has his/her own view and what works for me cannot work for other people. My basic idea was that if you start loving your small losses you will be able to not let them grow bigger, you will stake with your planned drowdawn not exceeding it. As I said it was just my opinion. I'm not thinking of being better than anyone here, i m just myself. Btw thank you for your replies.

 

[Sidekicker]

I think it was Paul Tudor Jones who said that losses should hurt, and he's probably a better trader than the guy who advised you to love losses.

I don't disagree with the argument, but the holy grail is to achieve indifference, or possibly mild curiosity to the outcome of a trade

Except he was trying to trade the market based on some 80 year cycle as if it would go up on the same day it went up 80 years ago. Crazy fool.

 

[77sigmatrading]

Just to keep the thread educational if you feel why don't you write down what do you feel when the market is just 1/2 ticks from your stop loss?

 

[NVP]

Researching and learning is everything, you make your luck. For sure Tudor Jones, and a lot of other traders are better than myself, i was sharing with you what I have learned in more than a decade working in the industry. Each one of us has his/her own view and what works for me cannot work for other people. My basic idea was that if you start loving your small losses you will be able to not let them grow bigger, you will stake with your planned drowdawn not exceeding it. As I said it was just my opinion. I'm not thinking of being better than anyone here, i m just myself. Btw thank you for your replies.

Fair enough

Perhaps my scalper mentality but I Would repeat again

I FECKIN HATE LOSSES

telling a young Bjorn Borg or Boris Becker to Love double faulting was never
going to make them wimbledon champions (Topical )

and calling the ball out against a young john Mcenroe ?

N

 

[NVP]

whos Tudor jones ?

 

[77sigmatrading]

I perfectly understand you

 

[Sidekicker]

whos Tudor jones ?

While we're on that note, who the phuck is Alice?

 

[LOTONtech]

A post published on 77SigmaTrading site:


Do you remember your last loss? If the answer is yes or it is fresh or it is painful. One of the best trader I have ever met one day said to me: I take losses everyday and you know what? I love my losses.

From that day, every single loss i was taking I was thinking to those words. One day I have found what he meant.

The bottom line is that trading is a game of probability, reason why when you have an edge, you should stake with it and never change it until it is not working anymore. Think about it, does a Casino chooses the hand of blackjack to play? The answer is not. The reason lies in the fact that the Casino has an edge and if out of 10 hands the casino wins on 6 and those 6 make up for the loosing ones than you have a money making machine. So if you have an edge stake with it and do not change the way you are trading just because you have a losing strip.

How do you define an edge? An edge is just something that put more probability on your side, it can be a pattern, it can be an indicator, it can be an oscillator. it does not matter how you define your edge the important thing is that it works over a defined number of trades. You know better than anyone else your statistics, you have run your backtesting so you know the maximum drawdown of your system, the profit factor, the average profit per trade. But there is something your maths do not take into count. Yourself.

I’ m writing this post thinking about my trading day, I had a plan, I had a level to trade, I knew where to put my stops but you know what? i had an expectation. Everyday I have an idea, it can be a choppy day, it can be a trending day. I will play the long side or I will play the short side. Those ideas are made through observations. If i have an idea and the market does not confirm my idea I’m usually quick enough to change my mind, because no one knows the market better than the market itself so I cannot be right, I can only be wrong.

Troubles arise when your expectations are so strong that you start moving your stop loss you start reading only the news that follow your idea, you start blaming the market, you start hoping for a positive outcome though you know that the market will never give you the 20 points you need. So where is the problem?

The problem is in your mind, you start reading the market through the lens of your position, you do not listen to the market and you transform a negative day in a very bad day. Think about how many times you turned your initial loss in a very huge loss just because you did not want to take that loss? I tell you something I have learned years ago: “the first loss is the best loss”.

Learn to love your first loss, do not try to re-enter a trade just because the market cleared out your stop loss: Are you doing everything in your best interest (from a trading stand point)? Often the answer will be no, you are just not admitting to be wrong, you do not want to accept your losses cause you will feel a looser. This is what is going on in your mind? Do you agree? So start thinking to losses as the price to play each day. Decide in advance what price you are willing to pay and stay with it. If you will follow this rule you will reach consistency.

There are very few good days in trading but a lot of down days and slightly positive days.

That’s how trading works mate.

I remember several years ago being seduced by the idea that every "stop-out" for a small loss (before it got bigger) was a good stop-out. Imagine my excitement when my too-tight stop orders were stopping me out all over the place. Every one of them was surely a "good thing" and I loved it! Maybe it even became a self-fulfilling prophecy, with me subconsciously setting those stop orders tight enough to almost guarantee the excitement of stopping out for a loss.

Don't get me wrong, stop orders (even tight ones) can be a good thing, but there are dangers in "learning to love losses" too much.

 

[Nigel-P]

Good thread. I think it's not so much a case of loving your losses for me but more just to be fairly clinical and unemotional towards them. Accept that they come along every now and again and get on with it. I would sum up my reaction to my losses (and I have a LOT of losses) is "meh".

Getting to stage that losses don't bother you requires, in my view, the use of leverage or position size that you are comfortable with (that is different for everyone and depends on your personality) and an intimate knowledge of the detailed statistics of your trading strategy.

Good trading

Nigel

 

[77sigmatrading]

Thank you Nigel, this was exactly the purpose of the thread, each of us has a different perception about his/her losses, and sharing our self assessment . The use of the word LOVE was used to indicate a state completely different from the anger that usually arises. Being unemotional is the goal in my opinion.

 

[Nigel-P]

Thank you Nigel, this was exactly the purpose of the thread, each of us has a different perception about his/her losses, and sharing our self assessment . The use of the word LOVE was used to indicate a state completely different from the anger that usually arises. Being unemotional is the goal in my opinion.

I've written a few posts on this topic on a blog I'm involved with. The address is below, the posts are in the psychology section. It's a topic that isn't discussed enough amongst traders, particularly new ones, who try to avoid losses at all costs. This is more often than not much to their detriment. Study in this area is one that I honestly believe has the capacity to do most to turn a trader from losing money to making it.

I always remind myself of the chapter in one of the Jack D Schwager books about SAC Capital. Steve Cohen, managing billions, had a trade success rate of 5%. He took his losers like a true pro, the winners always paid for the losers, as long as you cut them.

I actually started a thread on here about this topic too, but it didn't last very long

Good trading

Nigel

 

[77sigmatrading]

I surely will have a look at your blog Nigel, and i truly appreciate your comment. If we all learn how to treat them we will be better of in our trading. If we wanna make a living out of it.

 

[Davidee]

I don't know about loving the loses but as for fear and greed, they're like two sides of the same coin I guess. So don't risk what you can't afford to lose, be careful with leverage and control the greed and the fear will take care of its self.