Contrary to popular belief, day trading is all about losing.  Winning is great, but it’s how you deal with the losses that will define you as a trader.  If you can learn from every trade, win or lose, I can almost guarantee you will succeed in your trading endevours.

Better Trades

The first thing you should focus on is making better trades.  Hold the winners longer, and cut the losers quicker. This approach will ensure that you become profitable long before you get your win/loss ratio positive.  Even with a low risk/reward ratio of 1/2, you can lose twice as many times as you win and still break even.  If your risk reward is 1/5 you can be a HUGE loser and still make money.  Check out the following example using the 1/5 risk/reward ratio;

• Trade 1 – $100 loss
• Trade 2 – $100 loss
• Trade 3 – $500 win
• Trade 4 – $100 loss
• Trade 5 – $500 win
• Trade 6 – $100 loss
• Trade 7 – $100 loss
• Trade 8 – $100 loss
• Trade 9 – $100 loss
• Trade  10 – $100 loss

Look at all those losses.  If you add it up though, you’re still ahead $200!  This is why traders focus on trading better first, and winning more often second.

Be the Best Loser You Can Be

Here are a couple of steps to be a better loser;

1. Cut Losses Early – You can’t control which way a trade goes once you enter. You can, however, control when you get out. This goes back to the point above about making better trades. Improve your entries & exits, and hone your trading skills, and the wins will follow.
2. Keep a Trade Log or Journal – You need to analyze every trade you make.  Keep a pad and pen (old school) by your computer when you’re trading.  You should write down your entry & exit criteria as well as anything else noteworthy before you forget.  After the market closes, go back and flesh out those quick notes with some deeper thoughts and analysis about the trade.

Redefine

It really boils down to redefining what “losing” means to you as a trader. A losing trade is one you don’t learn from. Whether a trade is a win or a loss, you should always take something from the experience in order to improve as a trader. If you don’t, the trade is a loss even if you’ve made money.

Losing is a part of trading, so get used to it. Embrace your inner loser. And with that, I leave you with the greatest loser anthem of all time.

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