Trading Educators Blog
Learning from losses
Winners learn more from losses than from profits. When a profit is taken, there may be little room for improvement. When a loss is taken, a trader's self-discipline is the first thing to be examined. The second aspect of a loss is how did the actual price action cause the loss? Was there a trend reversal; an unexpected gap? Most beginning traders sustain losses due to emotional reactions. Traders should ask these questions: How could I have improved the trading results on this trade? What did I do right? What did I do wrong? What were the technical reasons for entering and exiting this trade? Lessons learned from a loss are the price of knowledge gained. It is for purposes of learning that a trader must learn to plan. Comparing actual actions and results with a trading plan will highlight where the trader went wrong.