I think of my entry, stop, and profit targets as linked together and all equally important to The Trade. My profit target has to be an adequate multiple of the risk I take in order to create a positive expectancy. .

At the root of it, I think traders successfully use a variety of tools to discover trades that have a positive expectancy. It does take a bit of work to find trades with an edge, but I think most traders are able to do it. Judging from the journal pages, I think most traders are capable of finding enough entries to be profitable. But it seems the trouble comes when they take too many small losses, or when they take losses that are too large.

So, for me at least, it comes down to questions like, why do traders do things that lead to lots of losing trades? Why are they taking huge losses on a trade or two?

From reading numerous forum posts, it seems that most attribute these things to poor psychology. We blame frustration, greed, and other emotions. And there is no doubt that our emotions can lead to moving stops, scaling-in at the wrong time, cutting losses too early, and taking too many trades outside of The Edge. But I also think there can be a lack of understanding of certain market dynamics that contribute to emotional decision making.

But I think you can be profitable without a perfect understanding of the forces that are moving the markets. IMO, it takes steadfast control of emotions, and a stubborn determination to remain true to The Edge. This would include thinking of our trades in a probabilistic way, avoiding a deterministic approach, and taking appropriate losses (ie getting stopped out).

Speaking from my own experience, I know that I can become impatient with a good expectancy. . Even a really good setup can lose a few, or many, times in a row. That can take a toll and I'm still figuring out the best way to deal with that. On the other hand, sometimes a great setup can win many times in a row and I will quickly develop a deterministic mindset. And then it becomes tough to operate under this false pretense. .

I have found though, the more little tid-bits I learn about the markets, and the more information I am able to correctly interpret, the more I am able to gain emotional control. So, at least in my own case, understanding and emotional control are linked to a degree. It is debatable, I understand, but I think there is a correlation between a good understanding of market dynamics and emotional control. And we need that control over ourselves to take an acceptable loss within the boundaries of our Edge.

Like I said before, I think it is possible to be profitable with a super limited understanding of the markets, it's just really-really hard. It takes dead sober, stubborn, and determined adherence to The Edge you have discovered.

Taking losses in an acceptable manner is a great conversation to have and I look forward to reading what others have to say!!

why doe clicking lat on this forum nto ever take me to the last post? i find myelf annoyingly having to click on the page or page numbers over and over again. is this something other people have to do also?

Salao 

I think of my entry, stop, and profit targets as linked together and all equally important to The Trade. My profit target has to be an adequate multiple of the risk I take in order to create a positive expectancy. . At the root of it, I think traders successfully use a variety of tools to discover trades that have a positive expectancy. It does take a bit of work to find trades with an edge, but I think most traders are able to do it. Judging from the journal pages, I think most traders are capable of finding enough entries to be profitable. But it seems the trouble comes when they take too many small losses, or when they take losses that are too large. So, for me at least, it comes down to questions like, why do traders do things that lead to lots of losing trades? Why are they taking huge losses on a trade or two? From reading numerous forum posts, it seems that most attribute these things to poor psychology. We blame frustration, greed, and other emotions. And there is no doubt that our emotions can lead to moving stops, scaling-in at the wrong time, cutting losses too early, and taking too many trades outside of The Edge. But I also think there can be a lack of understanding of certain market dynamics that contribute to emotional decision making. But I think you can be profitable without a perfect understanding of the forces that are moving the markets. IMO, it takes steadfast control of emotions, and a stubborn determination to remain true to The Edge. This would include thinking of our trades in a probabilistic way, avoiding a deterministic approach, and taking appropriate losses (ie getting stopped out). Speaking from my own experience, I know that I can become impatient with a good expectancy. . Even a really good setup can lose a few, or many, times in a row. That can take a toll and I'm still figuring out the best way to deal with that. On the other hand, sometimes a great setup can win many times in a row and I will quickly develop a deterministic mindset. And then it becomes tough to operate under this false pretense. . I have found though, the more little tid-bits I learn about the markets, and the more information I am able to correctly interpret, the more I am able to gain emotional control. So, at least in my own case, understanding and emotional control are linked to a degree. It is debatable, I understand, but I think there is a correlation between a good understanding of market dynamics and emotional control. And we need that control over ourselves to take an acceptable loss within the boundaries of our Edge. Like I said before, I think it is possible to be profitable with a super limited understanding of the markets, it's just really-really hard. It takes dead sober, stubborn, and determined adherence to The Edge you have discovered. Taking losses in an acceptable manner is a great conversation to have and I look forward to reading what others have to say!!

I thought this was a great post and very thougth provoking. I do not have all of the answers of course but in order to trade I must be confident in my own reality that are the markets. yes this thread about loss was not really mentioning psychology much and as much as psychology absolutely plays a part in loss and the feeling of loss if you are playing the game with basic strategy using stops and taking losses then psychology should be taken out of it as much as possible. i think that it is emotion and or psychology that causes people to hold on to enormous losers or add to losers at the worst times or do to omuch size at one time because they want to FEEL something from it. It is amazing how great i feel when i make 5 dollars on a es micro trade. why because one day it could be a mini or 3 minis instead of a 1 lot micro.

but yes it is psychology but i think in order to trade properly and i think we would all agree that a machine has no emotion no memory just raw data that it imediatly reacts and trades after and some of that is early info before it hits retail traders screens.

you mentioned why do people do what they do and take lots of small losses.. well thats because of a few things. if it is part of their strategy then they are following instructions and being non emotional but if htey are just nervous and scared out then that is emotion. you have to take trades and lots of them. if you don't you limit your chances of seeeign yourself get comfortable with making trades and believeing in your own dsicretionary edge or your edge to cutlosses or your edge to make great trades and cut bad ones faast.

thanks again and good post.

Cutloss 

why doe clicking lat on this forum nto ever take me to the last post? i find myelf annoyingly having to click on the page or page numbers over and over again. is this something other people have to do also?

Seems to be working fine on my end. Do you have an ad/script blocker? Sometimes these disable things. Perhaps try another browser

i am not sure what is going on but i can never seem to click last and get to the last post which has me clicking and clicking!!

Anyway because today is an up day and i am usually a PERMA BULL i am doing much better than yesterday I tend to do well
when I am not forced to take losses or should take losses I mean.

I am still struggling with how and when and where to place stops if i place them at all and overall for me
i think the best form of risk management would probably be a max loss per DOM so if i am in nq and it loses 100 im out
or if ines and it looses 100 im out.

i wish more people would get invovled here and talk about loss. you do not need to state exactly what you do but trust me at
PROP firms they are sharing ideas all the time and these ideas get you to thinking about your own new ideas.

I am thinking about starting a journal where i post my daily gains and losses as well as some of my rants.

hmmm..

COme one I KNOW some people took losses YESTERDAY we all know that its much harder to make money selling even though it looks easier and happens faster but that
is exaclty why we lose more on big down days!! picking bottoms etc. the algos are really working over time lately to mess with the BTFD wow

I don't worry about taking losses. To me a loss is the same as a fish stealing my bait. Good for the fish, grab another worm out of the box. I am wrong about direction or duration probably more than half the time. Good trends are not out there lying around all the time like bunnies in a basket.

The question I always ask is, was my stop in the right place?

If it was too close to the action, why was I so close to the action? If it was too far back, how did it end up there? By focusing on that point, I have become very good at putting stops, but I still watch it carefully.

Currently I focus more on where to add, where to add is tricky.

after my losing trding tody it is still obvious I may have some good ides about cutting and taking losses but implementaton and execution of them manually is just non existent. will make these changes or else the end result will always be the same.. LOSS that will take out 2 3 4 5 or all of your hard work,., i say this to you and to myself.. what good is a plan to take losses if you do not execute on the plan and shame on me for not having an exit plan.. today