Arnoud replies to: how to accept losing?


{quote} How will you make big money unless you are willing to take losses that hurts.

big money comes with consistency. consistency comes from knowing what you are doing and experience. as a trader, your sole job should be to manage risk, not manage expected returns. returns should be arbitrary.

if you dont believe me, do the maths. assume you have a 80% win rate. ie, out of 100 trades, 80 wins / 20 losses. you risk 20%/trade for a risk reward of 1:1.

to this point everything is pretty much calculable.

now comes the tricky part. there is no way of predicting/calculating when a loss will occur or how many of it happens in a row. it may occur at your 10th trade / 10th & 11th trade / 10th – 30th trade which by your risk allocation you would have been margin called.

if you are gonna call me out on why i choose number 10. why not 70th win trade as by then i will have more money under my belt. fine. use a calculator, create a spread sheet. be it the 10th / 50th / 70th trade the results are still going to be the same. either u end back at breakeven or get margin called unless you do proper risk management.

my point being, losses is part and parcel of trading. you can have 70 wins in a row. im sure it will make anyone with that stats feel like a god. but trust me. what took you 70 trades to make. you can lose it in the next 10 if not for proper risk allocation.

btw the above example is provided you know your trading stats and you trust it given that you have tested it / relied on it for years. as per what i meant with consistency and experience.. this stats should be what all aspiring traders should be gathering and keeping track of.

if a professional gambler goes all out to know his stats and statistics. a trader should least do the same?

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