Losing Trades

Don’t let decisions be infinite. Avoid the Infinite Loop

The problem with losing trades is that… they can last forever.

In trading? Yes. Well at least until you run out of money. In life? They literally can last forever.

What do I mean by that?

I am a trader. I tend to view everything in life through the lens of a trader. I look at everything as what value am I giving up and what value am I receiving? If I do this then I will get this.

I have been working the currency markets for the past couple months from a perspective I like to refer to as warehousing or managing inventory. Its a very simple way to view the market. I use no indicators. I use no stop loss. And generally I use no profit target. I am trying to hold a larger number of positions at low leverage and and sell them back at profits. Some profits are big, some are small. It just has to be profits.

Here is my dilemma with this system. Let me back up a second. I believe that we trade with our overriding life perspective, or world view. We allow things in trading, good or bad, that we first allow in our  lives. And this system has brought to light one of my faults. Holding on to losing trades. Don’t get me wrong, that is what inventory management says to do, hold the inventory until better prices are available and understand that it will cost you cash buying power while it sits on your shelf. That’s that. No way around it. But what I am saying is that do I prefer this system BECAUSE it allows me to hold my losers.

I don’t know. There are many times in life where I know a decision, a trade basically, is not working. But I like to hold it. Maybe I like  to hope it works out. Maybe I’m afraid of the finality of being wrong. I tend to get into positions and then second guess everything and then I freeze up. I can be frozen there in that spot for years. I know I can. I’ve done it several times.

So, how do we figure out how to just not get into those trades? That would be the easy answer right? What indicator would allow me to always stay out of the bad trades and only get in the good ones? It doesn’t exist. It’s false precision. We will never avoid wrong decisions. Ever. They will happen. Nothing can keep us from that. The only thing we can change is what we do inside of the wrong decisions.

We will get more hurt by using false precision than we will by using those situations to become better operators

Basically what I am saying is that I have never regretted the times I have made a decision, any decision. I have only regretted how I have operated inside of that decision.

The three things about any decision (Trade)

1. Make the Decision Quickly The best operators in the world don’t take a lot of time to make a decision. They intake the information and make decisions quickly.

2. Operate Inside of that Decision Don’t look outside of that trade. Once it’s made, don’t second guess it or wish it would have been different. Operate inside of that decision. Even if the choice made is to shelf the inventory, don’t sit and watch it on the shelf everyday. That will kill you.

3. Exit Immediately Once the decision is made to end the trade, do it immediately. Indecision can last years of your life and cost more money than you can imagine. A good friend always tells me “there is more money lost to indecision than the wrong decision.”

Teach yourself to make quick decisions, to operate inside of those decisions, and then to exit them immediately when they are no longer what you want.




2 thoughts on “Losing Trades

  1. I’m too indecisive to trade your way. That is why I’m building my plan with a set of rules, that will take away much of the decision making, before and during the trade. I can see the possibilities in what you’re doing, but for me I see greater risk, which wouldn’t allow me to do it. Of course I know that there are many things in life I don’t understand, that others are making a success of. I am personally wanting to get out quickly if the trade goes against me well before my stop.
    There seems to be some very interesting, out of the box stuff being written on the blogs I follow at the moment. It’s almost like you’ve all stepped up another level from the plateau. Keep it up.

  2. Thanks Simon. yes there are problem areas to my strategy but part of being good at trading and good at life I am finding out is being able to deal with some pain, see the bigger picture, and continue to fight it out even in the presence of great resistance.
    We all find a path eventually and yours will do you just as well I am sure.

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