The Stock Exchange is all about trading. Each week we do the following:
- Discuss an important issue for traders,
- highlight several technical trading methods, including current ideas,
- feature advice from top traders and writers, and
- provide a few (minority) reactions from fundamental analysts.
We also have some fun. We welcome comments, links, and ideas to help us improve this resource for traders. If you have some ideas, please join in!
Our previous Stock Exchange considered a couple of the biggest causes of trading failure (hint: position sizing and psychology). If you missed it, a glance at your news will show that the key points remain relevant.
This Week – Are You Trying To Win Every Trade?
This week we build on last week’s theme by offering another cause of trading failure: perfectionism. Trying to win every trade is not only unrealistic, but it’ll drive you crazy. According to Dr. Brett Steenbarger:
“There is nothing constructive about perfectionism. It’s self-abusive; it doesn’t move us forward. It’s a dumping of anger, not an effort to learn from mistakes.”
In reality, you don’t need to win every trade. You don’t even need to win more than 50% of your trades, as long as your net gains are strong compared to net losses. This means having a process in place to deal with your losing trades. According to Irrational Investors:
“A strong investment process is easy to describe, challenging to implement, and rewarding when done well.”
For example, it’s easy to describe a process for dealing with losing trades, challenging to actually stick to that process, but it’s ultimately rewarding in the sense that it will help you achieve strong net gains, and it’ll help you avoid the psychological pitfalls of striving for perfection.
For reference, Nial Fuller explains why you need to learn to lose properly to win at trading. His article is targeted towards forex trading, but the lessons are applicable to a wide range of traders. According to…