An amateur trader makes a trading plan and decides to execute it to perfection. He decides his entry price, his stop-loss price, and his target price. He decides when and how he will trail his stop loss. Based on his plan he takes a position and finds that the trade is not moving in the desired direction. Eventually, his stop loss is triggered and he has to bear the loss. This makes him unhappy as not only has he been proved wrong by the market but he also had to pay a price for finding out.
This is a classic double blow delivered by the market time and again and is a part of the life of every trader. Here, on the one hand, the ego is shattered for being wrong and on the other hand, the trading account has been reduced in size to the extent of the loss.
The big difference is how the trader deals with this situation. Here is the difference in outlook between a professional trader and an amateur one.
The professional trader understands the market and knows that risk and loss are a part of the game and is prepared for the same. With prudent risk management techniques, he has minimized the risk involved in the trade and is prepared for all eventualities. Thus when the loss does occur it is very small and does not harm his trading account in a big way. Also, his psyche is so tuned that the idea of being wrong in the trade does not bother him and he stays unaffected.
The amateur trader also understands that the trade could go wrong but has still not mentally accepted the same. He probably does not have a risk management technique in place and hence his losses are bigger. This coupled with the lack of confidence in his trading system pushes a trader into justifying his mistake.
Instead of accepting and embracing his loss, he starts finding excuses and factors on which he could blame his losses. He blames the market or the company whose stock he bought or just about anything he can think of to cover up for his sorry state.
And when the same is repeated over and over again this blame game eventually develops into huge guilt and burden which he carries every single day. He has run out of excuses and knows deep down that these excuses are irrelevant and the fault lies within him. He is so burdened by his guilt that he no longer dares to accept his mistake and eventually gives up trading.
A loss is a loss!!!!!!!!!!!!!!!!
No excuse or blame can change the loss into a profit.
Then why not accept the loss as one’s own mistake and move on. By doing that, not only does one learn from his mistakes and become a great trader but he also can control his ego and emotions and reap the inherent rewards in the long run.
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