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The Art of Trading: Reframing Losses as Integral to Success
The Art of Trading: Reframing Losses as Integral to Success
Updated over a week ago

Trading is a lot like solving a puzzle – every move, whether you win or lose, is important. Just like we accept sales tax when we buy things, it's important to understand that paying a commission is a normal part of trading. Let’s look at this idea more closely.

Trading Commissions: A Normal Part of Trading

Imagine you’re at your favorite store, about to buy something, when you see a 7% sales tax. You don’t walk away; you accept the tax as part of buying something. The same goes for trading – commissions are just part of the process, a small fee on the road to your goals. They help keep the trading process running smoothly.

Good and Bad Trades

Let’s think differently about what makes a trade good or bad. Usually, a trade that makes money is seen as good, and one that loses money is seen as bad. But think about the commission – you pay it whether you win or lose. So, shouldn’t we see every trade as neutral from the start, not just based on its outcome?

The Losing Trader's Mindset: Looking Backward

Think about a gardener who only decides if a plant is healthy after it has grown or died. This is how a losing trader thinks – they only decide if a trade was good after it’s done. A trade that makes money is called 'good,' and a loss is 'bad.' It’s like driving by only looking in the rearview mirror.

The Winning Trader's Mindset: Planning Ahead

On the other hand, a successful trader is like a chef who carefully picks ingredients before cooking. They think about whether a trade is a good idea before they make it. The cost of the commission is just a small part of this bigger decision.

What Makes a Good Trade

A good trade is like a well-played piece of music, where every part works together. It meets all the right criteria: it fits the market, has a clear point where you might change your mind, follows daily trends, shows patterns, uses the right amount of money, and has a good plan for managing the trade. It’s a trade that sticks to the plan, not one that just makes things up as it goes.

What Makes a Bad Trade

A bad trade, however, is like a wrong step in a dance. It doesn’t follow the trader's careful plan. Even if it accidentally leads to profit, it’s still a mistake because it didn’t follow the rules.

The Real Goal: Being a Master, Not Just Making Money

The main goal in trading isn't just to make money; it's to become really good at making smart trades. Money is just a result of a well-thought-out trading process that uses an advantage over many trades.

Conclusion: It's All About the Process

In the end, trading is an art where losses and commissions are part of the bigger picture. Focus on making smart trades, stick to a disciplined plan, and remember that making money is just one part of a much bigger story. Like a painter who thinks about every brushstroke, a trader should focus on every trade, making sure each one fits into their overall strategy.

Article written by: Ivan Cocco, Director of Risk Management and Trader Development at ETX Funding


Disclaimer

This article is for informational purposes only and should not be construed as financial advice. Always consult with a qualified financial advisor before making any investment decisions.

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