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Willingness to Accept Losses

аHere is yet another important quality that the effective futures trader must either possess or develop. Perhaps the single greatest downfall of all traders is the inability to take a loss when it should be taken.

Losses have a nasty habit of becoming worse rather than better. Unless they are taken when they should be, the results will not be to your liking. Although it is easier on one hand for the futures trader to take a loss than it is for the position trader (since a loss must be accepted by the end of the trading day), it is still the downfall of many futures traders who are unwilling to accept the loss when it is a reasonable one. The disciplined futures trader must have the ability to take a loss when the time to take a loss is right. What's right is dictated by the particular trading system or risk management technique that is being used. I would venture to say from my experience and observations that perhaps 75 percent or more of all large losses are due to the fact that they were not taken when they were relatively small or when they should have been taken.

These are just a few of my random thoughts on the topic of day trading and discipline. Remember that in the day events, prices and trends move quickly. Decisions must be made almost instantly. Hence, your discipline and persistence are of paramount importance. There are many wrong things you can do and only a few right things. Know the right ones and act accordingly!

Summary

This chapter has acquainted you with some of the issues, assets, liabilities, and challenges that face the day trader. While there is no doubt whatsoever in my mind that day trading can be a highly profitable venture, I am just as certain that there are few traders who will consistently achieve success in day trading unless and until they understand the rules, follow the rules, master their self-discipline, and use effective trading systems and methods. The rest of this book will attempt to give you those tools clearly, concisely, and logically.

Remember that day trading is a dynamic process. Markets change, traders change, and underlying conditions change. Hence, as a day trader you must not allow yourself or your market understandings to stagnate. You must constantly be on the search for new methods, new market relationships, new techniques, and new procedures that will help you take advantage of current conditions. Where there are basic indicators and understandings that are perennially effective, there are always new perspectives and new methods. These can only be discovered by ongoing research and by ongoing evaluation of your current systems and methods.