Saturday, June 21, 2008

Coming back after a bad trade

Coming back after a bad trade is very important to anyone looking to succeed in the stock market. If you quit every time you lose money then it will be hard for you to make any money trading.

Every trading strategy has wins and losses. That is a simple fact that you have to get used to. If there was a strategy that had no losses in it everyone would be trading it and the markets would probably go bankrupt.

What the average new trader will do is develop a strategy through paper trading and backtesting. Then they start trading with actual money with great hope. Then they make their first trade and it was a loss.

They scratch their head, but get over it after all their strategy has many losses as well as wins. They decide to let it go. Then they place another trade. This one is a loss too. Now they are in panic. They can’t believe it lost twice in a row.

It is perfectly normal to lose twice in a row but they lost money. That is the big different thing between paper trading and actual trading. If you lose fake money you tend to keep at it until your account is positive. If you lose actual money you feel like you do not want to trade ever again.

Stopping trading when you are down can have major negative effects on you. It can make you feel like you cannot make money in the markets. And if you do stop you will often see great profits go right pass you.

Some of the biggest profits you will ever have are the profits you would have taken after you had several losses in a row. You might even finish a month like that positive based on that one trade. You never know for sure what is around the corner.

For more information on what to do during bad trades visit

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