What Did You Learn From Your Last Losing Trade?
In Major League Baseball great hitters strike out 6 out of 10 times they step up to the plate.
What's the secret to success? Persistence. Practice. Adjustments. Great Coaching.
Great baseball hitters adjust when they make a mistake and keep swinging. It's inevitable in trading that you will have losers too.
Successful traders embrace their losers. Analyze their losers. Learn from their losers. Make adjustments so they don't repeat those mistakes and move on.
When you have a losing trade, the first question to ask yourself is: Did you follow your trading process and plan?
If you answered yes
Congratulations! Even though your trade was a loser, it can be considered a success. One of the biggest parts of trading is your pre-game strategy. That means you have taken the time to develop a trading plan, test the approach, and identify appropriate target and risk, or stop-loss levels. As long as you feel confident in your approach, stay disciplined and keep pulling the trigger on your trades when the opportunities arise per your trade plan.
If you answered no
You have some work to do my friend. Identify the emotions around your trade entry. Were you swept up in the excitement of the moment? Was it a reaction trade after another losing trade? Why did you enter a trade that was not part of your trading process? If you don't have a trading journal or record, of every single trade you put on – start that now. Record the trade and write down why you put it on. It's time to start keeping yourself accountable.
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All Traders Makes Mistakes
There are two types of traders —those who learn from their mistakes and those who don't. Usually the ones who don't learn from their mistakes aren't trading very long.
Just like pro baseball players that practice on a daily basis, traders can too. If you have fallen prey to a significant losing streak, take a step back from real money and paper trade.
Paper trading could be key to breaking bad trading habits, or conquering negative emotions that derail your trading success. It's like a baseball players who adjusts his grip or stance to find that hit that gets him on base. Traders need to practice and adjust.
The Recipe for Trading Success
In 1985, Benjamin Bloom, a University of Chicago professor published a landmark book Developing Talent in Young People. Bloom analyzed the key factors that contribute to talent.
He studied the childhoods of 120 elite performers who had won international competitions or awards in fields ranging from music and the arts to mathematics and neurology.
What did Bloom discover? There were no early childhood indicators that predicted these elite performers success. In fact, later educational research found there is no correlation between IQ and elite performance in fields including chess, music, sports, and medicine.
You may be asking. So, what does this have to do with trading?
Professor Bloom found 2 differentiating characteristics among the prodigies:
- Practice – all the elite performers practiced tirelessly.
- Mentors – all the elite performers studied and worked with devoted teachers, mentors or coaches.
The same goes for trading. Yes, trading can be taught.
It takes practice and a great teacher.
Learning from a mentor can make the difference between success and failure in trading. My name is Sarah Potter
and I teach traders of all levels every day. Come trade with me. Try out my live options trading room
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