How to learn to lose and manage losses when Trading
Jordi Martí explains why every trader must learn to sometimes lose. It's something normal that you most learn to manage to trade successfully. You just can't influence the results of a trade but do you know what you can and should influence?
Today I am going to explain to you why you must learn to lose in the stock market. Why should we learn to lose on the stock market? There are times when we will lose because movements in the stock market are largely random. The technical analysis that allows us is to play with the probabilities, tha...Read more
Today I am going to explain to you why you must learn to lose in the stock market. Why should we learn to lose on the stock market? There are times when we will lose because movements in the stock market are largely random. The technical analysis that allows us is to play with the probabilities, that is, to put them on our side, but it must be clear that in a very high percentage of the time we will fail operations.
As traders, we can never influence the outcome of the trade, but we can influence three things: the first when we enter, that is, when the odds are in our favor. The second when we leave, we must know when we have entered a value and at what time we must leave. We must be clear that when certain circumstances occur it means that we must leave that value. Finally, and super important, what risk we take in each of the operations.
We can define the size of the operation based on the probabilities that this operation is correct in this table. What I want to show you is the relationship between the number of three devices and the risk-benefit with which we usually operate. Let's imagine that we are a trader that every time we enter the market we risk 1 to win 3, that is, we have a risk-reward ratio of 1 to 3. That means that we could fail 70 percent of the operations and we would continue to earn money, But if we play with the odds and our set ups have a positive mathematical expectation, that is, we will win more times than we lose, we are in this area of 50/50 down, let's put the case of 60-40 which is not unreasonable. This is what we would earn; Therefore, it is important to know how many trades on average we win in relation to those we lose, but above all it is important to know how much we risk and how much we expect to gain with that risk. Each trader must know what his probability of hits is and each trader can decide what risk he takes for certain benefits.
In short, all traders will have losing trades and this is normal, our success as a trader depends on our knowing how to manage this. To be a good trader you need study, perseverance and a lot of passion. Only with the right tools and training can anyone dominate the markets and achieve financial freedom. Sign up for our courses at www.canaltrader.com and make your dreams come true!Less