The Art Of Losing

Trader's Mindset

Apr 03

Most trading educators would have you believe that consistency is the secret to success. However, the problem with that belief is no one can be guaranteed consistency. It is only an artifact that can be examined in the past. The reality is that successful trading may require losing: over sometimes even prolonged periods of time. The number one skill that traders need master is the ability to protect their capital while staying engaged with markets because every good trader knows that when things do line-up they can make a lot of money: that is as long as they still have the capital to trade.

Let me share that if I look at my results objectively, I can certify that I have exceptional ability in reading and calling markets. This ability was manifest very early on in my interest with markets. In addition, I have built successful systems. And, yet I do fully admit that I have blown out multiple accounts over the years.

On first hearing that, you might think that my systems quit working or that the markets changed to become more difficult and that was the cause of my blowing out accounts. The reality was that my systems were performing normally when I blew them out and even went on to make significant highs. The cause was my over leveraging them beyond their design. As for my discretionary trading, my core ability to read markets did not change significantly: although, I do believe markets are more difficult. In most cases, it was combinations of problems with lack of discipline, trying to “wing it” with too small accounts, and not fully vetting methods. Simply it was not managing losing well.

While I have not reached the level of results I desire, I have came to the realization that most likely that if I do obtain those results then it will not be for my original abilities– which were above and beyond normal. Of course, having exceptional ability probably hardened me to adversity to some extent. But beyond that, it will most likely be simply the grit and determination to keep working on my craft in the face of adversity. It will be the result of being able to manage my risk, keep my losses small, and staying in the game.

Think about if the real factors for trading success was not some super-normal consistency or super normal skill but simply the combination and balance of grit, determination, continual learning, and working on ones craft over time. How would that change your outlook as a trader? For myself, I am determined to stay in the game.

My objective for 2020 and beyond:

Keep the losses small, keep learning, and stay in the game. The wins will take care of themselves.

About the Author

The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at