Friday, April 27, 2012

It's ok to lose - accept it and move on

People who want to participate in the markets need to accept that there is no 'holy grail' that will guarantee a 100% success rate - it simply doesn't exist. As a result, traders and investors need to acknowledge that losses can and will happen, which is why risk management is critical to success.

The markets this week have shown some strength, whereby on a couple of the major indices the short signals previously given are no longer valid. I rarely trade the indices as I prefer to concentrate on stocks, but if I had traded those short signals it is simply a loss suffered, as per my pre-defined risk parameters. Such losses must be accepted and consigned to history.

Traders also need to remember that you do not need to be fully invested in the markets at any given time, or even making changes to their portfolio of positions on a day by day basis. Some of my most profitable days or periods have been when I have already been in a number of positions, and have simply done nothing (other than maybe adjust my stops per my system rules). Conversely, it is important to remember that cash is also a position - for specific reason as I mentioned in the chatroom, I did not take any short positions last week. Patience is key in this game, as you want to be able to play over the long haul.

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