Professional Trader Series: The Art of Losing | DZHI - DZH International 

Professional Trader Series: The Art of Losing

  • Brent Penfold
  • 6 July 2016

Professional trader and author of The Universal Principles of Successful Trading (Wiley 2010) now translated into German, Polish, Japanese, Korean and Simplified Chinese.

Bad trading is gambling. Good trading is following a clearly defined process. Most traders inadvertently gamble and trade badly. Bad traders lose their risk capital. Winning traders follow a process, a process that extends way before, and far beyond, a trade plan's day to day search for set-up, entry, stop and exit levels.

From my 30 years of trading experience I see successful long-term trading being the accumulative result of profitable traders implementing a winning process of trading. A process that usually includes most, if not all, of the following;

  • Art of Losing
  • Art of Preparedness
  • Art of Enlightenment
  • Art of Trading Style
  • Art of Portfolio Selection
  • Art of Execution

Learn, comprehend, embrace and execute, execute and execute these steps and you will be well on your way to becoming a long-term profitable trader despite any short-term loses and set backs.

The Art of Losing
The first step in the process of trading is to learn the art of losing. There are very few experiences that are shared by all traders. Very few. Amongst the few there is one stand out experience.

And that is of losing.

Every, and I mean every trader, experiences it.

Regardless of a trader's preferred market, instrument, timeframe or strategy, every trader experiences loses.

What separates those few traders who enjoy consistent trading success and the majority who suffer consistent losing results is the art of losing.

The winner knows how to lose well.

The loser only knows know how to lose badly. So badly in fact they blow up their account losing most, if not all, of their trading capital. They are terrible losers.

Terrible losers have to first learn how to lose well before they can begin to hope to dream of profits.

This is one of the many ironic wrinkles found in the trading landscape we find so appealing.

Not many people come to trading with their primary focus being to master the art of losing. Most come to trading to win and win big. Not lose. Yet you need to master the art of losing before you can hope to experience the joy of winning.

Talk about a topsy turvy world. A world that attracts many due to its allure of profit yet reluctantly only gives up its treasures once loses have been mastered.

This is one of the hardest first lessons a new trader experiences and one they have to learn. New traders first have to focus on their loses, what they mean to both their account and their spirit and how they are going to survive going forward through a kaleidoscope of misdirection, false paths, confusion and disillusionment. You mention it and trading has most of the "disappointments" life can through up.

So for a new trader it's very hard to experience success if their initial goal is to focus on profits. It rarely works.

Before you can experience trading success you first need to master the art of losing.

So if you are new to trading you'll first need to learn how to lose well, do that and you'll be taking the first concrete step towards a life of successful trading.

If you're experienced in trading and still continue to suffer loses don't lose heart. Understand that managing loses is probably the single largest obstacle that stands between a trader and their long-term success. Accept it and develop a plan to master it.

In my opinion there is only one true secret to long-term trading success and it doesn't have anything to do with either a magic indicator, a clever entry point and or some secret trading technique. It simply stems from mastering the art of losing.

Write this down and never forget it;

...the best loser is the long-term winner...