by Gavin M.
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We've all been there. We've all done that. By that I mean having to go through a losing trade and wondering how it happened and what we can do to somehow turn a negative into a positive. First of all, if you lack the discipline to put a stop limit on your trades and take the losses, perhaps you might want to address that first. It is imperative that all trades have a stop limit and the proper exit strategies be followed.
When I have a losing trade, I always have a stop limit. If it hits my stop, then I take my loss and move on. I don't wallow in despair and cry my eyes out because Mr. Market was being a bully. The market is one big rigged game that you must play in order to make some semblance of a profit. If that does not sound appealing to you, you are not in the right industry.
But if you are adamant at keeping your losing trade then it is important you do NOT add to a losing position. Averaging down in trading does not work. It may work in the investment world but not in the trading world. How can you be so sure that it will somehow reverse and go your way? It's already going against you at that point anyway.
I find that it works best if you somehow condition your mind to finally accept that losses are part of trading and that it is essential to recognize a trade that may have gone wrong and to go mitigate your losses. By moving on and finding other setups, you are able to give yourself a chance at redeeming your losses and turning a profit.
Losing money in trading is normal and will always happen even with the best research you have done for yourself. Adding to a losing position will not help you, not one bit. Your ability to be versatile and quick will do more to increase your chances of profitability than having to keep wondering why the losing trades you made did not work out. The markets will continue to defy logic and you just have to keep doing whatever trade system you have, provided it works. If it does not, perhaps it is time to take a step back evaluate and see if you need professional help.
Stay thirsty my friends!
Traders from Equity Sense will be writing on this blog on positions and other market-related things.