Every great trader and investor, and especially every bad trader and investor, has losses.
It’s NOTHING to be embarrassed about as I stress this again and again in weekly webinars for my trading challenge students.
Heck, you can see I only win 72% of the time and I’ve turned thousands into millions…see all my trades HERE
The difference between being a successful trader/investor and a failure is that we successful people know how to deal with these losses.
We don’t freak out and start betting bigger in order to get bigger profits in an attempt to wipe away any trace of the losses from our accounts.
Download the key points of this post as PDF.
We don’t get too emotional and think our world is coming to an end.
We accept that every now and then we all make mistakes.
And we are determined to learn from our mistakes because we understand that failures and losses make us wiser and make us better and wiser in the long run.
The beauty of being successful an wealthy using techniques that we have learned over many years is knowing that we will come back from any losses because we are self-sufficient.
This is why I strive SO hard in creating self-sufficient millionaires, like this young man is well on his way being, not just copycat traders who can mimic my trades but don”t really understand them.
Read my best-selling book for free HERE for a limited time and see all the mistakes I made along the way while turning my $12k Bar Mitzvah gift money into several million dollars…it wasn’t a straight line up to millionaire by any means.
Learn from my biggest stock market loss of 2012 HERE
Learn from my six-figure loss that killed my hedge fund credibility (even with the loss of roughly 35%, my hedge fund still finished up 2%/year over 4 years…my haters like to say I “blew up”, nope, that’s reserved for a fake guru who likes deleting his trades from Profitly 🙂 )
And besides being all positive and wise about my losses, I also get ridiculously angry…and usually drunk…because I’m human.
Don’t try to ignore the pain because it will just well up inside you — don’t be afraid to let it out, ideally in some healthy fashion like a good workout or scream at the top of your lungs.
Perhaps watch inspirational videos like these:
But when you are ready to get back to trying to make money in the stock market, remember these 5 key rules:
1. Go back in with much smaller position sizes since your psychology is frayed
2. Sometimes I even watch the markets for a few days and make no trades whatsoever just to work out a few hypothetical trades in my head to see how I would do if I did trade with actual money
3. NEVER GIVE UP — most of my biggest losses have been followed by my biggest gains, I’ve simply mistimed the trade a bit, but that doesn’t mean my thesis is wrong
4. No matter the size of my painful loss, I take comfort in knowing I’m still in the game and can live to trade another day…the best traders do screw up, but we minimize risk because we realize no matter how good a trade or investment looks, we can always be wrong and if we’re absolutely wrong, we cannot, under no circumstances, risk blowing up and losing our nest egg and be taken out of the game…once you’re out the game, it’s much more difficult to get back in and be successful like before.
5. Call and see friends and loved ones who earn far less money than us…this makes us feel better about our choice of career and reaffirms our desire to succeed in this game…you need to stay hungry and prepared for more profits at all times and when you lose a lot of money, you just don’t feel like you have it in you anymore…resist the urge to give up…resist the urge to not do everything you possibly can to make back what you lost and more.
6. If the losses make you even more hungry for profits, resist the urge to make everything back and more RIGHT AWAY…you need to find the balance again of being able to profit off superior opportunities, but not force trades that aren’t great simply because you want to feel whole again.
Trading, like life, is all about balance.
I tell my trading challenge students the best trading mindset that I can teach them is to think of themselves as a retired trader who only comes out of retirement to take on great trades because if we missed those trades, we’d feel very guilty for wasting easy profits.
Trying to come back big too quickly after big losses prohibits us from implementing this highly reliable mindset and so you must resist the urge to make back all the $ too fast IF the trade setup isn’t there.
If it’s simply a case of mistiming and after you take the loss, the trade looks great again, double and triple check with yourself before betting again (using the pre-trade checklist I will be teaching at my upcoming Vegas conference October 12-14, 2013 (email [email protected]es.com for special earlybird discount pricing), but if you check out and the trade checks out, feel free to trade again and do what you have to do to get back in the groove of consistent but opportunistic profiteering.
Just remember, even the most successful people in the world have losses…look at this billionaire who lost tens of billions of dollars all within a year is is now worth a puny $200 million: