January 23, 2006 at 6:20 pm | | Comments 4

Another Definition of Trading

Most people think that trading is the buying and selling of stocks. I suppose it is, but I often say that trading is the continual process of making and losing money. This is true! A trader’s success all boils down to making more when he’s right and losing less when he’s wrong. What matters is the difference between how much you make and how little you give back!

I’m right more often than I’m wrong, but that wouldn’t necessarily have to be the case for me to make money. By managing trades properly, a trader could be 50/50 or even worse and still come out profitably. It’s about taking small losses and sticking with the winning trades to overcome the small losses.

Knowing that I’ll be wrong certainly helps me to accept a losing trade. Every day when I settle into my routine, I’m aware that I will probably have at least one losing trade – but that doesn’t stop me from trading (or making money). That awareness doesn’t hurt my confidence, but instead it keeps my ego suppressed. I know that I’ll be wrong, so when I am, it’s far easier to hit the sell button and wipe that small mistake off my screen. Then I can focus on my winning stocks without the eyesores and annoyances of stocks moving opposite of what I had anticipated.

Don’t let your ego interfere with your trading! Going to battle with a losing trade by adding to it or simply letting the truck roll over you without getting out of the way are all due to ego. Accept that there will be some losses, commit to keeping them small, and stay focused on getting the most out of your winning trades.

Follow my trades and see how I manage both winners and losers with a 2-week trial to my swing trading service. You’ll like the net result!

Jeff White
President, The Stock Bandit, Inc.

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