by Jeff Yates
As I write this article, I think of the many traders in the world out there that can’t accept temporary defeat. There are so many new traders that enter the markets each and every day that will not allow a losing day, or two, or three.
My friends, I am here to tell you that “IT’S OKAY TO LOSE SOMETIMES”. Traders seem to run into problems when they have a few losses under their belt on any given day, and they start placing trades all over the place trying to get their money back. This is where discipline is paramount. If you are not having a good day, just realize that it’s just one day.
The last time I checked, the markets will be open again tomorrow. Some of the best traders I know have losing days.
Over a five day week it’s possible for a great trader, who earns a living from trading the stock market to have a losing day in the week. Here’s an example of the likely results you might see from a full-time trader on any given week (this also applies to any other investment, or make money program):
Friday: +$ 190.00
There you have it. Over $2500 in a given week, and 2 out of the five days the trader was better off not even bothering to show up and trade. The key is to keep your losing days small, and let the winning days just happen. This can ONLY occur when you stay objective, and have discipline. This concept was one of the most encouraging things I had heard when I was a new trader. No one ever told me that it was OKAY to lose at times.
When I was down on the day, I traded twice as much just to try and get back to break-even. Although sometimes I did, more often I did not, and as a result, I encountered even greater losses by the end of the day.
The mindset of a trader has to be one of calmness. Watching money go down the drain is not a fun thing to have happen to you. The self-talk that happens when a trader is not profitable on any given day is incredible, except for traders who understand how we must roll with certain days. A typical day for a new trader may start off with excitement and enthusiasm, and they may even feel butterflies running rampant in their bellies.
As a novice trader, you may find that your first trade does not go so well; the second trade may be even worse. Your inexperience says to you, “Shoot, the stock is still going down, OK, I’ll buy more down here; surely this will allow me to get out even or ahead.”
The market keeps falling; there is no bounce in sight, and your capital is at ZERO. You know that you will get a margin call if you leave this open, but you take your chances hoping that you can get out within the 5 day call.
Your spouse notices a different attitude today as you worry about this stock coming back to break-even. You can’t sleep, you toss and turn, and you can’t wait for the morning to arrive, so you can get to your computer, and check your stock in pre-market. The market opens, and you get a bounce, and take your profits just over break even.
You are so happy now, because you did not have to realize that loss. This situation occurs again and again until the market demands all of the profit not only for this new trade, but for all of the others that you did not earn correctly. Oh, and by the way, the market wants penalties, and interest as well. Does this sound familiar to anyone? Maybe you, or someone you know?
My friends, stay disciplined, and follow your trading plan. Don’t ever let the story mentioned above happen to you. If you allow it once, you will allow it again and again until the market will not let you play and win in this trading world ever again.
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Jeff is originally from Florida. He enjoyed a brief racing career in Daytona, and later switched his focus to the direct sales industry. Over his 23 year professional career, he operated several businesses spanning multiple countries which resulted in achieving prominent levels of financial success.