May 7, 2007

In this week's free newsletter, we'll take a look at something every successful trader is willing to do:  Finding Value in Losing Trades.

No trader is right all the time.  Losing is just part of trading, it's that simple.  But losses can still have value if you are willing to look in the right place.

When I first got into the stock market, I was wondering how much I could make on any given trade.  I didn't pay much attention to the losses, even though they were still a part of my results.  I was too focused on the winners.

Overcoming The Ego

A little maturity came in the form of some painful losses that forced me to learn to protect my capital.  As I began to do more than just ignore my bad trades, I finally took the approach that maybe they could have some value to me.  I love to constantly improve at whatever I'm working on, so my trading quickly became the same way.  Pretty soon, I started to evaluate my mistakes as they occurred to see if I could stop making the same ones unnecessarily.

Sure, some losses were painful and hard to evaluate.  At times I'd have to wait for a day or two and then look at them.  Others were minor and pretty painless, so it was no big deal.  But day in and day out, I would review my trades and see what went wrong.

I began to ask myself if the loss was just a function of the market, or had I made mistakes?  Did I play it too tight, or had I given the trade too much room?  Was I trading too large and it spooked me out of a good setup?  Did I follow my trading plan accordingly?

Pain Leads to Profits

As I got more comfortable reviewing the questions, the honesty helped my results.  I found that it helped me get over the losing trades quickly because when I was wrong, I paid some tuition but I walked away with a lesson of some sort.

Be willing to review your trades closely, and you'll find that your progression as a trader will happen much more rapidly.  The answers will prevent you from making the same mistakes multiple times, help you put bad trades behind you quicker, and let you move forward toward that next winner.

In summary, cut the losing trades but hang onto the lessons!

Here at TheStockBandit.com, we evaluate the results as they happen.  The Trade of the Week feature for members is a post-mortem review of what made a particular trade good or bad from the previous week, and we learn from that exercise.  And every day, existing trades are discussed and evaluated to keep tabs on their progression.  When they're closed out, more discussion follows as we try to take a lesson from each trade, win or lose.  It's the willingness to learn from our past that will propel us to even higher levels in the future!

Learn as You Trade!
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"I have learned more here in 6 months than anywhere.  I have never heard anyone break down the markets with such clarity.  Jeff has a way of shedding some light on the big hairy monster and making it much less intimidating."   - Chuck B., AL

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Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com

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