How To Deal With Losses In Trading


Today, we are going to talk about how to deal with losses because when trading, there will be losses. And I’m going to show you today how
to deal with it. [MUSIC] 3 things you need to know about losses. First of all, when trading, thing number 1, losses will happen. They are part of trading. Yes, you will have winning trades and you will have losing trades. And this is very important because as humans, we are not wired to accept that there will be losses. We think that this is failure and it means that we failed. But this is not the case. You will have winning trades and you will have losing trades. You have to be able to accept the fact that there will be losses. Now how do you deal with them? Well, this is where the second thing you need to know about losses, you’ve got to keep them small. My rule is: never risk more than 2% of your account on any given trade. If you have a $5,000 account, 2% would be $100. If you have a $5,000 account, you should be okay losing $100 on a given trade. If not, trading is not for you. One of the reasons why people, mainly traders struggle to deal with losses is because they
let the losses become too big. And there’s is a challenge, of
course. If you have a $5000 account and you have one trade that makes you lose $2,000, of course, you have a problem dealing with losses, but if you keep your losses small and there are only 2% of your account… Think about it. You could have 5 losing trades in a row and you’re still only down 10% on your account. So, let’s run the math. If you have a
$5000 account and you’re risking a $100 on any given trade. If you have 5 losing trades in a row, you’re only down $500. You still have $4,500 and you should be OK with that. The 2 things, we already talked about losses. First of all, they will happen. Second thing, you’ve got to limit your losses. Keep them extremely small. And the third thing, you need to find a way to make more
money on your winning trades than you lose on your losing trades. And typically this is with a Trend Following Strategy. A Trend Following Strategy means that you’re not trying to pick bottoms and tops, that you’re waiting for a trend. And then you use the momentum and this shall carry you forward. So, this is how you can risk $100 and then trying to make $200. And when you do this, when you make more money on your
winning trades than you lose on your losing trades, you could be wrong half of the time and still make money. Because think about it, if you lose a $100 on your losing trades, and you have five losing trades, you lose $500. And if you make $200 on your winning trades and you have five
winning trades, you make a $1,000. Lose $500, make $1,000. You still have $500, even if half of your trades are
losing trades. In summary, how do you deal with losses? First of all, you have to accept the fact that
there will be losses. Second, you have to keep them small and as a rule of thumb, I recommend that you never risk more than 2% of your account on any given trade. Number 3, make more money on your winning
trades than you lose on your losing trades. You can swing for the fences, risking $100 trying to make $500, $1,000. You see, that’s not very likely. Aim for small, but consistent profits. Hope this helps. If you’re not subscribed yet, make sure that you subscribe here on Facebook or on YouTube and also hit the little bell button that alerts you every time I’m going live or every time I post a new video on
Facebook. So, this was how to deal with losses in less than five
minutes. If you know anybody who might benefit
from this video, feel free to share it. If you would like to meet us live in person, go to bootcamp.rockwelltrading.com
because we are doing bootcamps across the country where you can join us and we’ll show you exactly how I personally trade. Until then, take care. Click on like and leave a comment and let me know what you think. Make sure to subscribe to this
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2 thoughts on “How To Deal With Losses In Trading

  1. How about option trading? I bought a 10 contracts put for $1.15 each contract, total $1150 plus commission, so my stop loss should be 2% of that amount, about $25 or less?

  2. Hi Mark the 2% of Lost are remaining in the swing trade or day trade ? Should staying 2% in go long? Or different %

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