From the May 4, 2003 Break Out Report

Losing to Win
by Ken Ballard 

In this article from 2003, my partner Ken Ballard talks about how to deal with losing trades.

If you trade stocks regularly it is likely you often get an ouch, or in other words, you are saying to yourself “not another losing trade!”. Well that just means you are one step closer to hitting a home run and being able to consistently win more than lose. Bottom line is to win you must lose.

What ?!  Trading stocks is not a lot different than playing sports. Every team that wins the Stanley Cup didn’t get there from making no mistakes and never losing. For some reason junior stock investors seem to think that they can and must make money on every trade. A trader can also fall into the trap of “Well I just doubled my money so I can easily do that over and over”.  Another trader’s trap is thinking you have figured the markets out for good and have most or all of the answers.  The point I am trying to make is that to be good you have to endure some pain along the way, learn from your trading and limit your losses.

My longest winning streak was 9 winning trades in a row and huge gains. With money pouring in it was almost impossible for me to think it would ever end.  I felt invincible and being wealthier quickly is the wrong way to get there. My longest losing streak - 4 trades and recoverable losses. Perhaps I haven’t lost enough to be a wizard. Regardless, I would like to  be  a  wizard  as  defined in a book written by

Jack D. Schwager called Stock Market Wizards.  In this great book the author interviews great stock investors to discover their strategies, approach and profile.  These wizards are the best of the best, incredibly wealthy from years of work and heavy losses.  Without fail, most of them have failed and still continue to have some losing trades, but overall they are millions ahead of the game.

Do You Have Wizard Potential? Are You A Wizard Now?

How well do you handle losses, or better yet, how do you currently prevent big losses?  Let me answer both of those questions with the winning attitude and approach.  I offer several solutions.

• Accepting the fact that you will lose sometimes is a good first step. 
• You can afford to lose some money sometimes otherwise you don’t participate.
• You actually learn from your trades.
• You do not let your ego get in the way nor your emotions control your trading.
• You constantly work on new strategies and ways to make money more consistently.
• You follow your rules and let bygones be bygones.
• Your strategies work and are somewhat proven.
• You are making money or have made a lot of money from dozens of trades.
• You stick with your system while being open to trying some new ones.
• You have an exit point for all trades.
• You have stop loss points.
• You don’t let greed or fear rule you.

These are just some of the key drivers that make great market wizards. The toughest ones are emotional ones like ego, greed and fear. It is fairly easy to get started in the market and many newbies make money.  Some make it too fast and too easily which is only setting them up for some terrific, or should I say horrific, losses.  Ah yes! The easy come, easy go syndrome.  It certainly can apply to stock market traders.  There is no quicker or easier way to lose your money except perhaps gambling in a casino or getting married too young or too often.

An investment of time and money in education in stock market systems and knowledge is much more valuable than most schooling. That is, if you plan to use both.  So if you lose some money it is not a matter of you cannot do it or you should not do it again.  It is a matter of learning - taking your lumps and becoming better, much like life.  Be a good loser and winner, you will win more often and you will look good doing it. 

I find it amazing the number of people I speak to who say “Stock Market? Oh I wouldn’t touch it again. I lost money once” or “I have given up”.  That is exactly how others win.  I take the approach with trading and with life of asking questions.  Questions like, why didn’t it work, what could I do differently next time and what do I need to know?  As Obiwan said to Luke - The answers are within you or something like that!   May the market be with you no matter which way you play it.

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