Sunday, September 21, 2014

Van Tharp talks about losses

Further to my post about taking small losses while you can, here are some words of wisdom from Van Tharp's interview in Market Wizards:

"Winners typically differ from losers in their attitude about losses. Most people become anxious about losses, yet successful speculators have learned that an essential ingredient to winning is to make it ok to lose. Since most people in our culture are taught that only winning is acceptable, most investors must change their beliefs about losses to be successful."

This comes back to an often quoted question about trading: Do you want to be proven right, or do you want to make money?

Successful speculators have no qualms about taking losses. Due to good risk control, their are no emotions attached to taking losses. Unsuccessful traders have issues such as pride, fear and ego to deal with, which can affect their ability to take those losses.

"The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance." - Ed Seykota

More on this here.

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