Loss in Trading, Not always a bad thing!

  • 2022-03-30 07:26:25
  • 5 min read
A

So, no one likes to be a loser but in the world of trading why it is not always a bad thing? 


Let’s start with small losses protecting traders from much bigger ones given that a long stretch of only winning could in some cases be setting the trader for a fall. On a small-scale loss will help understand doesn’t work in your trading strategy or what needs to be adjusted, categorizing your losses and profits to eventually realize what works.  


Losses can also eliminate emotional attachment to a specific trading strategy. These emotions are more common in trading than you think and could seriously impact your judgment. While emotionally driven trades could work out to be beneficial, associating losses to such behavior will help minimize its impact on your overall trading behavior. 


Think of loss and gain as two sides of the same coin and the probability of someone not losing money ever is almost impossible. Losses are a fundamental part of financial trading meaning that trading is about losing every bit as much as gains. Experienced traders tend to accept a loss positively, they look at what went wrong and learn from it as they learn that losses should also be valued.


Some analysts may argue that if a trader is not losing any money, either they aren’t trading enough, or not taking enough risks without which no real gains can be made. Losses can therefore reflect the scope and motivation in your trading strategy and in case they don’t exist, what would this say regarding your trading strategy.

 

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