n trading there is really only one certainty - some of your trades will lose money. Losing money is never fun, but it is a major part of trading. How you deal with those loses separates the successful traders from the unsuccessful ones. The secret of success in trading is to be able to ignore individual trades, some will win and some will lose. After a series of losing trades we must still be able to pull the trigger and place the next trade, you never know when the next winner will come. Of course, we assume that our method is sound to begin with and this is where we need confidence. It is essential to believe in your own system and this confidence comes from doing our own testing.
Most traders will lose confidence in a method with as little as 3 losing trades in a row. In an extreme case you might have a system that wins only 25% of the time but the average winner is 5 times larger than the average loser. If you have 3 losing trades in a row and give up then you have lost 3 points. The confident trader will know that 3 losers in a row is not uncommon (0.75*0.75*0.75 = 42% of the time!) for this system and will continue to trade - the next trade is the winner for +5, giving +2 overall. The losing trader might now see that the system has become profitable again and jump on board - just ready for the next losing 3 trades in a row. The point is, with any trading system you cannot pick and choose which trades to take - you must take them all.
You must know your system before you begin to trade - check out our equity curve simulator.
Tim runs Online Futures Trading, a website that provides information and resources for traders. Tim also provides a free day trading system.
Source: www.isnare.com
