Why Every Single Trader Needs A Big Loss

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As a rookie trader we often believe that we can maneuver easily through all the obstacles that experienced traders went through when they first began their journey in trading.We hear stories of blown accounts, over-sizing, fear, greed and any more reasons to lead to failure early on in their career. New traders often get told that when we start, we are going to go through the same things. Maybe not as aggressive as them, but for some maybe more aggressive. Some will have struggles early on, some may have success early on.

I was someone who had mild success early on, and as a result I believed that i would never be one of those guys who lose a ton of money while trading. Some money, yes, but a lot, hell no.

Until one morning I was in my living room sitting in front of my laptop ready for the market to open at 9:30 Am (I’m in Ontario, Canada). I held a position overnight and was ready to get out. When 9:30 Am hit I clicked the “Sell” button but i never got filled. I was confused, “why am I not getting filled?” It took about 3 minutes to get filled. My small overnight profit of $40 something dollars 3 minutes after open was now -$20 loss. Now when i look back on it that wasn’t the worst thing that could have happened, but being a new trader at the time and not knowing how much a role my emotions played in trading, I got furious and frustrated. I was upset that my order didn’t fill when I wanted it to. So i quickly took another trade so that I could make back the money I lost, and maybe more. Big mistake.

That day i ended up being down about -$500 dollars on a $1100 dollar trading account. I did exactly what some professional traders said they did; I revenge traded, didn’t cut losses quickly, used hope as a strategy and basically blew up half of my account. I was so emotional afterwards. I was crying and I was getting depressed. It felt so bad because they were my decisions, my stupid decisions. I still remember physically punches myself in the face. Like, literally, punching myself in the face. I felt like its what i needed to feel at the time for being so reckless. I barely left the house that day, and even when I did, I just wanted to go back inside and hide under the sheets. I got a random call from the bank later and all I could think was “How do they know I lost money”? They actually called to try and sell me some type of injury insurance but I straight up told her , “I lost a lot of money today, so i don’t want to talk about money at all”. The conversion went left and we ended speaking for about 30 minutes about what happened and why it was hitting me so hard. She gave me a bit of motivation to stay on track, and we said goodbye. I got off the phone feeling refreshed. I felt refreshed because after talking to that women at the bank, I realized that this was what I needed.

I needed that big loss because it put me in a mindset of figuring out what I did wrong and fixing it. You could say “Oh, why didn’t just follow those rules in the first place”? Its easy to say that, but some of the best lessons, and the lessons that stick with you are those that have pain memory attached to it. Now when i feel like I am not following my rules I remember the feeling that day I took that big loss, and it almost always steers me back in the right direction.

My advice is if you are new or even intermediate, embrace the losses. I promise you that most of your trading knowledge will come from those losses.  I always tell people around me “I’m glad I took those losses early on. I’d rather lose -$500 and learn those lessons rather than losing -$50,000, only to learn those lessons afterwards”.The sooner you lose, and focus on improving after, the better.

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