High Performance Trading by Steve Ward

Author:Steve Ward
Language: eng
Format: epub
Publisher: Harriman House

Practical Strategies: How Do Winners Handle Losses?

Here are a few hints and tips that, if you apply them, will help you to develop your resilience, to deal with losses and setbacks, and to bounce back more quickly.

Develop positive beliefs around losses

Accept that losses are a part of trading, and that setbacks and challenges are a part of achieving any challenging goal. Embrace the challenge. Tiger Woods famously said, “I smile at obstacles”.

Keep perspective

Imagine the number of trades that you make in a year and put a single loss into the context of the total number of trades. Imagine someone making 5 trades a day, 25 a week, 100 per month, and over 1000 a year; each trade, a losing trade, as a percentage of those trades is just 0.001%!

Learn and move on

Know that every trade, every loss, every mistake, every setback has something valuable in it… LEARNING! Learn from your losses, mistakes, errors, setbacks. Ask yourself, what have I learnt from that experience? How will I use it to make me a better trader? There is no failure, only feedback, and feedback is the breakfast of champions. Taking learning from losses and setbacks helps to release the emotional attachment to the event – you have acted on the feedback, and can now move forward more easily. See the implementation of the learning from the loss as an investment in your future trading career!

Take a third person perspective when evaluating your losses

Imagine watching yourself trading on a screen, or imagine standing behind yourself as you replay and evaluate your losses. This helps you to evaluate and identify the key areas for improvement, whilst at the same time removing the emotion of replaying the events again.

Don’t let a losing trade become I am a loser

Refuse to let your losses define you as a person. Separate out the behaviour from you, the person.

Separate a bad trade from a losing trade. What is the difference? A losing trade is one in which you traded your strategy, stuck to the rules and were disciplined, and yet had a negative P&L as the outcome. A bad trade is a trade that was a non-strategy trade, and is a bad trade regardless of whether you made or lost money!

Develop a post-loss ritual

ARIA, for example. In his book Sportsmind, Jeffrey Hodges outlines a visualisation process for dealing with setbacks and errors which I have used extensively and with great success with traders when they have encountered a loss or series of losses that impacts on their performance.

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