No one likes failure! However, traders on their trading journey are inevitably going to experience countless failures. In fact, failure itself is not terrible; the key is whether you can benefit from it.
Every trader is bound to suffer losses due to failure. The real difference between winners and losers lies in their attitude towards handling failure. Only by learning from failure, drawing experience and lessons from failed trades, and gaining something, can our trading skills continue to improve. So, since it is a failed trade, what can we learn from it? What should we do specifically? This is actually a science in itself.
Phase division of failed trades
Firstly, traders are divided into the following two phases:
1. Before creating a trading system
For beginners, before having a stable trading system, failure is the best teacher. By learning from failed trades, through observation, summarization, and induction, one can slowly explore methods and then gradually improve other aspects of the system, creating their own trading system.
2. After creating a trading system
After several years of continuous exploration, summarization, and induction, beginners gradually transform into experienced traders and have also created their own trading system. Subsequently, we can further divide the failures encountered in trading into two types: correct failures and incorrect failures.What is the correct kind of failure? It means that the trading system has its relatively stable win rate and loss rate, and the system will also generate some trading rules. As long as the trades that comply with the rules fail within a reasonable margin of error, they can be called the correct kind of failure.
What is the wrong kind of failure? It refers to the trades that result in losses due to violating the trading rules, which are called the wrong kind of failure.
Each trading system has its own strengths and weaknesses. When you have your own trading system, learning from failed trades can help you optimize the system's weaknesses, leverage strengths and avoid weaknesses, making the system more and more efficient.
How should we learn from failed trades specifically?
Learn from failed trades in a targeted way according to different problems encountered in different trading stages.
1. Before creating a trading system
First, keep trading records so that you can better review the trades later. Then, when reviewing, carefully compare failed trades with successful trades to see what the differences are. Observe and think carefully about why successful trades succeed and why failed trades fail. By continuously summarizing and generalizing, abstract a trading model and create your own trading system.
2. After creating a trading system
First, categorize the failed trades to see if they belong to the correct kind of failure or the wrong kind of failure. Then, for the correct kind of failure, try to think about whether it can be further optimized and how to do better; or, if it is determined that it cannot be further optimized, it can be temporarily ignored and regarded as the cost of the trading system. For the wrong kind of failure, you should strive to improve your execution. You can set up a reward and punishment mechanism, reward for adhering to the trading rules for several times in a row, and punish for violating the trading rules.By continuously learning from failed trades, one can refine their trading system into a system with a positive expected value, and constantly strive to maximize this expected value. No successful trader has a smooth sail. To become a successful trader, you need to accept that you are human and that everyone makes mistakes. Even the most successful investors occasionally make significant errors, and accepting failure is an important path to success. Remember: every trading day is different, and you have both profits and losses every day, so it is important to take some time to reflect.
Related Articles
The best retail investor in Japan, from 3 million yen to 23 billion! The trading
The real trading master to be introduced today is Japan's most outstanding individual investor. He is a mysterious figur...
A few points to teach you how to choose the most suitable trading platform
The first step in entering the money market for investment is to choose a good trading platform. However, selecting the ...
These 5 methods can help you catch the best time to close positions
In the trading market, as the saying goes, the one who knows how to buy is an apprentice, and the one who knows how to s...
Grasping the time frame is the foundation of profit
The concept of a time frame refers to a specific period of time, during which the price action is displayed on a chart. ...
Less trading, more earning?
Overtrading and overmanaging plague many traders, and this is even the main reason for the failure of some traders. Desp...
No matter whether you are a novice or an expert, one of these 5 effective tradin
Every trader who achieves stable profits has a set of strategies that he or she follows. Never believe those who say the...
3 trading principles, trading genius Michael Marcus made a profit of more than 2
Almost all investors have experienced the pain of failure. Today, we introduce this trading master who has suffered cont...
What are the risks, opportunities, and strategies of short-term trading? All in
In real-world trading, those who engage in short-term trades often make profits, yet they lose money in a way that is in...
Make a profit in simulation, lose in real disk, how to break this curse?
Many people say, "I can make money with simulations, but as soon as I start trading with real money, I lose." Where does...
The contest between "win rate" and "profit and loss ratio": How to choose in cur
For traders, to achieve profit targets, there are generally two directions of effort: continuously improving the trading...
What to do when trading encounters consecutive losses?
Biography of a Stock Market Master"King Cobra": Graduated from Fudan University in 2011 with a master's degree in econom...
Great speculator Jesse's 7 investment principles, revealing the truth behind his
Both his followers and fiercest rivals have to admit that as the biggest myth on Wall Street in the 20th century, Jesse ...
The Japanese "trading master" points out the psychological pitfalls of trading,
If the trading decisions you make involve real money, you will understand how challenging it can be. Our brains are not ...
The growth inspiration record from intern to senior big coffee
The protagonist we want to share today, Mr. He, is a senior trader with a 10-year trading story. Three months before gra...
A highly accurate intraday trading strategy
The trading market can have a million different methods, and you can also have a variety of different strategies. This a...
The summary of the actual plate of tens of millions of traders: Do these points,
Many traders may have experienced this: when investment banks or analysts recommend strategies, they will first vigorous...
The investment treasure of trading "weak"
Wahaha originated from grassroots sales, achieving a 370-fold increase in 9 years during the retail period, and was late...