How not to Increase Your Trading Losses

Market has not been Kind to Intraday traders from past few days, We are seeing Nifty trading in small range and big moves coming in matter of minutes which most of traders are not able to catch and in the process losing out heavily.

Handling losses is the MOST important quality a trader should develop.Best traders in the world have the ability to handle discomfort in order to control once action and behavior and  ability to stick to your trading strategy in both Profitable period and more important during losing streak.Trading is all about how u react to discomfort.

Reader would have observed in their personal trading You hold on to losses too long and gets out of winners too quickly.

Have you ever thought Why is that true?

The average trader will spend twice as much energy avoiding a loss as they will trying to obtain a  profit. The reason is that the average trader ego does not want to admit to being wrong.You want to be in comfort zone ie. Never take loss, As taking loss hurts mentally and your bank balance.

Thus, a common error is to hold onto a losing position hoping that it will turn around and thus avoid being wrong on the position. Yes I agree it do happen 5 times out of 10 when your position turn back in green but the times it do not happen its will hurt the most and the sole reason of Blowing off the account. The reason that the average trader sells winners too quickly is that selling a winning position is a sure way to be right instantly and thus it boosts the ego.

Interestingly, both mistakes are products of the ego, and have nothing to with profits or emotions as mostly said  except that both mistakes take money out of the trader’s pockets. You must keep losses small and avoid the hoping or praying stage that a loser will come back to breakeven. Breakeven levels are deadly reference points on losers.

Conventional trading wisdom of controlling and eliminating one’s emotions from trading does not work. Quite the contrary, the more we struggle to try and control our feelings, the more our attention is distracted away from our trading, and the more erratic our trading becomes.
As a trader You have to learn to accept your losses, because if you are not willing to take the chance that a trade could lose a predetermined amount, you will be afraid to trade or will be scared out of a good position as soon as you get a small profit. This defeats the goal to score big when you are right.  A successful trader’s mindset must accept losses as a necessary and beneficial part of the trading processes when handled properly.

Another vital aspect of knowing when to lose is that you must never give in to the temptation to ride out your losses, which amounts to saying to yourself, “It will come back”. That type of thinking has ruined many traders. In other words, you must have the discipline to always cut your losses or keep them small. This is the main thing that will allow you to say in the game long enough to become successful.

8 thoughts on “How not to Increase Your Trading Losses”

  1. Trading is all about how u react to discomfort — WORDS OF WISDOM



  2. Hi Jamwalr………. Indeed Bramesh Sir and his articles have been such an inspiration to us. He has been so magnanimous in sharing his knowledge to bring out the best trading qualities in us.

    Talking about the strategy that you have mentioned about trading in three lots and and squaring it off at different profit levels (when the price moves in our favour) also impressed me very much. However, I shall very much appreciate if you could advise the strategy that one should adopt if the trade goes against us and not moving in our favour. Should one get out of the trade ( all 3 lots) immediately upon hitting the Stop Loss levels set by us. In this case we would have to take a Bigger Hit since we are trading 3 lots.

    Looking forward to hearing from you or Bramesh Sir

  3. You are spending so much time on anslysis

    How much time have you spent in developing your cognitive skills on your psychology on understanding why you lost money and why it can be avoided going forwards

    spend time on your inner self first

  4. Sir…thanks to GOD and your counselling, we have long crossed the hurdle of carrying the mounting losses in the fervor hope of being in black again… only impediment we are encountering is early exit when the stock is due for massive breakout, thus romping home with just OK profit… one solution is trade in minimum three lots… square off first lot in first rise with stop loss of balance two lots at the entry price. If stock moves another high, encash another lot with SL for third lot at 2nd high. Hold the third and final lot till the end of day or till u get another massive high or stopped out…this is really working out for me…Rgds

  5. Sirji ,
    Multi time frame Analysis is the key , Sirji any article on same with current live example like Nifty analysis ?
    if some one is day trader than 4hr, 2hr, 1hr and 15 min chart become important
    if swing trader than weekly , daily and 4 hr ,2hr chart become important
    if position trader than monthly, weekly , daily EOD chart important

    Many times we are right but stop loss gets triggered , and than we don’t enter again

    Also as you said not keeping stop-loss blows the account , it happened to me lost 60% of account in April 2016 , sort of cornered now. will have take lot of effort and time to recover. very painful.

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