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How to guarantee that you never take a bad stock market trade again
– by Ryan Henry of TrendLizard.com
Have you ever made a bad trade? I’m guessing everyone who ever held a trading account has. A better question would be, what made it a bad trade? Probably the first thing that comes to mind is the loss you took on the trade in question. Maybe you managed to buy right at a high and sell at the low, or maybe some unforeseen news led to a particularly large loss. I’ll bet what didn’t come to mind was a trade you made money on. Yet, a truly bad trade could just as easily end in a gain. Well, if you want my advice, I’d say you should never ever make a bad trade again. You’re welcome for that sage advice.
A bad trade is innately an emotional trade. When you take a loss and say to yourself, “that was a bad trade”, it suggests that you did something wrong, like you shouldn’t have taken that trade. But if the trade truly fit your requirements for a trade, how could it be a bad trade? Are you upset that you were unsuccessful at predicting the future? I could have saved you the heartache and told you beforehand, you can’t. Don’t go around making good or bad trades. This is an amateur mindset that will keep you on an emotional rollercoaster up until the inevitable day comes when you’re broke.
We only take good trades; heck, we only take the best trades. We make sure a trade has everything we ever wanted from a trade, before we take it. A vast majority of the work is done before we ever get involved. We find opportunities that perfectly fit the mold. Specifically, we are looking to get in the way of confirmed trends that have the chance to really take off. From there, it either works out or it doesn’t. We gave our trade the best possible chance to succeed because our trading system is built to identify the ETFs that have the best chance to run. How can I possibly be mad if sometimes it doesn’t work out? I knew there was a risk that it would end in a loss, but my losses are well-managed – if it happens, it’ll be small. Make no mistake about it, losses will come. They are the cost of doing business, just like the manufacturer has to pay the electricity bill. I’m pretty sure he doesn’t feel like a huge failure every time that request for payment comes in the mail; neither should you.
This is a really important lesson in trading. If you want to be successful, you can’t live and die with every trading success or failure. If you do, it’s a huge insight into your trading mentality. Either you believe to have powers that you don’t (like predicting the future), you take haphazard, emotional trades (you shouldn’t), or you don’t understand that this is the nature of the game (you need to). Make sure that every single trade you take is the best trade you can take at that time, because that trade fits your criteria better than any other possible trade, before you take it. From there, ensure that your risk is managed by using a meaningful stop level, which immediately outlines your worst-case scenario. Accept that your worst-case scenario can happen and chalk it up as the potential cost of business. Then understand that your work is done (other than managing the stop level), and what happens from there is out of your control. That is the stress-free mental mindset of a successful trader; one who never ever makes bad trades.