Cut your fucking losers
“In a world where you can be anything, be the guy who cuts his losing trades early.” ~ An Experienced Trader’s Mantra
“In a world where you can be anything, be the guy who cuts his losing trades early.” ~ An Experienced Trader’s Mantra
Guys, have you ever heard of the Gentlemen's Agreement?
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There is nothing more annoying than another anonymous cartoon face regurgitating platitudes after platitudes. Especially when you know it’s true.
“Let your winners run and cut your losses early”
I hated this sentence with passion for years.
What the f*** does that even mean? Of course, I want to let my winners run and cut my losses early.
In today’s episode, we’ll focus on the former.
When I don’t understand something (which happens a few times a day), I always take my pen and notebook.
And I take notes.
My first reaction when I read this during my first few years of trading was “ok, I’m not going to change anything, except that I’ll use a 10-point stop instead of 50.”
Did it work?
Let’s just say I learned the hard way…
A Glimpse into My Trading Journal
Take a look at my recent trades.
Notice a pattern? (Hint: Compare the green and red bars.) I practice what I preach and I urge you to scrutinize whom you follow and trust in the trading world. Not everyone out there is trading for a living, yet their advice can be loud.
< start of rant>
It’s always sad to see some people I’ve been following for 12+ months on Twitter retweeting/interacting with obvious frauds. Sometimes I want to do something, then I remind myself that it’s just the natural cycle.
Remember, Darwin always wins.
</ end of rant>
The Unvarnished Truth About Cutting Losses
Now, let's tackle the elephant in the room: How do you effectively cut your losses? It's not glamorous, but the answer lies in data analysis.
Yes, I'm bringing up data and stats again.
By now, you should know that I'm a firm believer in evidence-based strategies.
If you're not analyzing your trading data yet, it's high time you started.
Let’s assume you have taken at least 500 trades.
Let’s be even bolder and assume they all follow the same setup (big assumption friends).
Go through every one of these 500 trades.
For each of them, study the price action following your entry.
With the help of 1-3 variables, track the ideal price where you should exit your trade when it’s not working in your favor.
Something I always say in coaching “If this trade works, what is it supposed to look like”.
Here’s one example where I short for a break.
I’m not waiting to lose my whole account before taking the loss.
“If that break would have worked, it would have worked.”
Now, you don’t have an excuse anymore.
📚 If you missed it, here are some of the last/best articles:
📈 What’s coming up:
Dead Dreams, Part II
How I Trade (10h+ of video)
One setup to rule them all
Now, for the few that made it to the end. YOU can change your life. You can become better. Learn from my mistakes. Be the change.
For you.
For your family.
For your friends.
I truly wish you the best.
Quick read. 10/10 content mate
Always happy to see these articles and I heard the CL pod. Excited to see the growth this year