If You Want To Win, Learn To Lose

I know that many of you are very familiar with the ideology that you always have to stay in a positive state of mind in order to achieve success. There are many others who press the idea that you need positive thinking in order to accomplish great feats in the Market. There are always going to be folk who say, "Just keep thinking positive." Well, the truth is that that statement isn't always correct - especially in Forex. Optimism is good and all, but when you are trading Forex - if you want to win, you need to learn to lose. I will explain...

I know that it sounds pretty ironic for me, a Forex investor and instructor of many years to be telling you that you need to begin to learn how to lose; then having the nerve to tell you that if you learn that you will become successful beyond measure. Here's what I am suggesting for you to get to that point - when you see a possible trade setting up, monitor your thoughts. What are you usually thinking about when you see that? Are you thinking about how much you think you are planning on making with that trade? Thinking about how wealthy you are going to be after that one cashes out? Well my friend and fellow trader, that is the WRONG IDEA! Actually, your only thought should be, "how much can I afford to lose if my stop gets hit?" Understand how many shares you can buy so that if, perchance, your stop gets hit, it will still be within your personal tolerance (in my opinion it should NEVER exceed 5% of your capital).

Many traders only think about how much they can make and therefore give no thought to position size. That can lead to a very dangerous situation. Let's take a fictitious trader named 'Sara' for example. If she is only focused on the upside of a trade, she might buy 5k shares because she is expecting at least a.25 cent move in her favor and $1,250 profit sounds great to her. Does that sound familiar? It's easy for her to buy that many shares if she only expects a 'win'.

The problem comes if that same trade, instead of going the anticipated way, turns against this very optimistic trader? What happens if the expected result isn't reached, but instead is heading in the opposite direction? If you have ever done this, the chances are greater that you already know the damage that this train of thought can have on your trading account and your general mental state - period! Understand that it doesn't take a great many trades; just one out of control trade can take you completely out of trading for a good long while. Have you ever damaged your account in 2 or 3 days so badly that it took you months or even years to earn back enough money to begin trading again? It is my self-appointed mission to ensure that you don't travel that road ever again...

I know very many people that fall into this category - myself included. I suppose that I could probably get upset and speak of my regrets with disdain, but there is absolutely no reason. I wholeheartedly recognize that without the pain that I have experienced early on in my trading career, I definitely wouldn't be the trader that I am today. Now, my first thought on every trade is the possible downside - EVERY TRADE! If I get a move in my direction, I quickly employ a trailing stop in order to break even AND pay myself as quickly as I can. This way, if my trade should happen to hit an "accidental home run," I am well prepared and receptive. You will have very few losing trades if you do this, and the losses you do have will be small. So, if you want to have a winning trading experience, learn how to lose properly!

When you want to win a game, you have to teach. When you lose a game, you have to learn.
Tom Landry

We must accept finite disappointment, but never lose infinite hope.
Play the game for more than you can afford to lose... only then will you learn the game.