Many people believe that trading the market is just too difficult.
And you know, I get where they’re coming from. As a beginner trader, it’s easy to allow your emotions to run the show.
But as Power Profit Traders, we know that trading on emotion is one of the number one mistakes you can make.
If you adopt a healthy trader mindset, however, trading works. And here’s the best part – it’s easy.
To create the kind of trader mindset that will hand you a life-changing amount of money, continue reading…
How Losing Trades Can Turn You into a Winner
I’m sure you’ve heard the saying, “life isn’t always about winning and losing.”
Many people believe that trading is all about winning, and if they lose a trade, then they’re failing.
It’s easy to get caught up in this mindset.
When you’re looking at a list of losing trades, it can feel like something is rigged against you.
But this is far from the truth.
Everyone loses. It’s a part of trading.
In fact, you’ll likely lose a third or more of your trades. But you can’t let those losses deter you. As long as you have a healthy trading mindset, then your winnings can still outweigh them.
All you need to do is follow these three steps:
1. Risk Management
One of the most important parts of trading is managing risk. In other words, your goal is to be a “great loser.” If you mitigate your risk well, then the winners will take care of themselves!
My dear friend and business partner, the late great George Fontanills, always used to say that before taking any trade, always ask yourself, “What if I’m wrong?” You need to fully understand the risks before opening a new position.
How much will you lose if the worst happens? And, more importantly, can your account accommodate that loss?
Prepare yourself to “lose well” by making this number as small as possible. Size the maximum loss so that it doesn’t take a big bite out of your trading account.
2. The “Don’t Put All Your Eggs in One Basket” Rule
The quickest way to trading failure is to put too much of your money in any one trade. Many traders “back up the truck” and load up on contracts when they “feel good” about a trade, only to lose big when the truck skids off the road.
A good rule of thumb is to only risk 2-3% on any given trade. This way, if you take a max loss hit, you still have 97-98% of your account to trade with.
Let’s say you have a $10,000 account. You should only risk $200-$300 in any one trade, leaving you with at least $9,700 left in the account if you lose.
Capping your maximum loss in this way will greatly increase your peace-of-mind and your success.
With losses limited, the next step is to win more often than you lose…
3. Rules-Based Trading
In order to be a great trader, it’s crucial to apply rules-based trading strategies. And one of the most important rules to follow is your specific entry and exit points.
By doing this, you can produce the following results:
- At least 60% winning trades.
- Average profits > Average losses.
Obviously, if you’re winning more times than you’re losing and your average profits are bigger than your average losses, then you’re making money. Your rules-based trading plan limits your losses and tells you exactly when to take a loss.
Imagine your trading mindset if the following were present:
- Your trading system produces 60% winning trades with the average profit twice the average loss. It makes money!
- Your trading system tells you exactly when to enter and exit. Nothing for you to decide.
- If you’re wrong on a trade, you lose only 2% of your trading account.
- You’re clear that you will lose 40% of the time and that’s part of your trading plan. Even with these losses, you make money over time.
Now, I’d call that successful trading.
Source: Power Profit Trades