A Brand New Day
The difference between top-notch winning traders and those who barely get by is the attitude they take toward losses. Trading is a tough business where setbacks and losses are commonplace. If you aren't careful, you can feel beaten, knocked down, and afraid to get back up. It may be difficult at times, but it is often necessary to forget about the past and start the trading day as if it is a brand new day.
The winning trader knows how to take losses in stride. As fictional character Jesse Livermore notes in Reminiscences of a Stock Operator, "Losing money is the least of my troubles. A loss never bothers me after I take it. I forget it over night." Sure, it is important to learn from your mistakes, and to the extent that you can do that objectively and unemotionally, you don't need to worry much about past losing trades influencing your current trading decisions in negative ways. But there are many traders who hold on to losing trades as emotional baggage. They place special significance on losing trades and view them as evidence of their personal inadequacy. They wrongly draw the conclusion that they may never be able to trade profitably. Why does this happen? Some traders allow their net worth to define their self-worth. They allow their profits and achievements to define who they are. When this happens, their ego is on the line with their money, and they have difficulty looking at the markets objectively. When they lose trading capital, part of their self-esteem is lost too.
Traders who put their self-esteem on the line with their money are especially prone to let their emotions take over. When everything starts moving against them, they may start to fear that they can't make profitable trades that day, and may feel as if they just want to walk away. Past emotional baggage can intensify these feelings to the point that they start making stupid mistakes and dig themselves even deeper into a financial hole.
If you are prone to feelings of inadequacy as a trader, don't let past losing trades overpower you at the wrong moment. There is a lot you can do to put aside these past memories and start the trading day anew. First, acknowledge your past losing trades. The biggest mistake of novice traders is trying to deny their limitations or deny that they have losses. Don't pretend that a losing trade didn't happen or that it has no meaning, when it actually does to you. You don't have to over-analyze things in minute detail and mull over the subtle emotional meaning, but you do have to acknowledge that you feel beaten. Dr. Ari Kiev observes that this mere act of acknowledging a losing trade can do wonders. Once you look at your feelings, many times, they quickly dissipate.
Just because you acknowledge losing trades doesn't mean that you need to believe they have power over you. Your past need not dictate the future. Believing that the past and future are linked is a common misconception. You can determine your future regardless of your past. Remind yourself that you can take decisive steps to overcome a potential losing trade. For example, you can limit your risk so that you will know deep down that it is virtually impossible to have a losing trade in the future that can have any real financial significance. You can also make a list of past winning trades that you can pull out and review while in the midst of a current loser to remind yourself that you can overcome your current circumstances by calming down, thinking positively, and taking decisive action. You can tell yourself encouraging thoughts, such as "It's no big deal. I can endure. I can get through this if I just calm down." There's no reason to get bogged down by a losing trade. Think positively. The past is the past, and the future is not yet written. When you treat each trade as a brand new trade, and each day as a brand new day, you'll see abundant ways of becoming a winning trader.