The Best Way to LOSE Trading Stocks

Robert Millar • 26th June 2018

Returning to Bali has brought back some memories….Including one that maybe isn’t the most pleasant. 

About a year ago, the last time I was in Bali, I took a nasty loss. It was all documented (video below) as well as my recovery process, but since it was such a pivotal moment in my career I wanted to reflect and expand on this more for you.

I will show you how to lose and what it takes to come back strong the next day. This is how successful traders stay on top of their game! 

Let me paint the picture…I loaded the boat on a PERFECT Fous4 Revival breakout pattern. This pattern was irresistible! Only problem was the liquidity on the stock was lower than I normally trade.  However, I knew this before I placed the trade and mentioned this several times on Fous4Live.  

I was holding onto 40,000 shares as my full position, and the rug was pulled under me and the stock started to tank. Since it was so illiquid, I couldn’t exit such a large position easily and took a $9,000 loss! OUCH!

It was a painful day, but I came out the other side a lot stronger mentally! Losing is a massive part of the trading game, and if you don’t know how to take losses you will never be profitable in the long run.

So many of you that don’t follow me closely say, “Hey Fous, why don’t you talk about your losses?” Well, the answer is I do all the time! I have many hours of course material based around how/when to take a loss in many different scenarios.  Let’s get into it! 

How to lose the right way and control losses

Controlling the severity of losses in trading comes down to 3 things: Risk/Reward, Controlling Emotions, and learning a proper system, play the right stocks.

1) Risk/Reward 

A proper risk/reward system will set you up for success and help you lose correctly. It skews the odds in your favor, and keeps your losses very small if you follow the rules.

You want to have a 3 to 1 risk/reward ratio. This means if your longing for example, you should have 3 times more room to the upside than the downside on the trade or you don’t take it.  This doesn’t mean you’ll always make 300%, but ensures you are always in a favorable position on each trade. 3 to 1 is a good ratio to use because you can have as low as a 50% win rate overall on all your trades and STILL be profitable! 

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2) Controlling Emotions

Emotional trading can get you into some very bad spots in this game.  Emotional trading can leave you susceptible to FOMO (fear of missing out), chasing socks, and adding into losing trades. All of these expose you to VERY high risk an can put your P/L (profit/loss ratio) deep in the red territory.

Cut your losses when you’re wrong, never add into your losers, and wait for the setup to come to you. Patience is key!  Trade like an algorithm…. Leave emotions at the door when you place your trades.

The above is easier said than done. That’s why I have 3 Programs on technical trading and a full course dedicated to psychology (Cloud9) so you know how control your emotions and keep your confidence high.

Confidence is the most important asset in trading! It’s also the easiest asset to lose if you are not mentally strong and disciplined. 

3) Learn and Trust a Complete Strategy

This is HUGE! My big loss could have been prevented by just following this rule.  Sure, the stock had a great Fous4 revival pattern, but I held too long ‘holding and hoping’ for it to turn around.  The fact that this stock had such a nice chart pattern it was breaking out of made dollar signs start flying through my mind, and thus caused me to forget other components in my system that would have protected me

Yes, sometimes even I will stray from my own rules and get greedy. It happens to even the best of traders as the market is the ultimate humbler! 

So find a system like the Fous4 system that has been proven to work time and time again in different market conditions, and fully commit to it. 

How to Digest Loses 

When you break the rules and incur a loss or a series of losses you need to bounce back! However, it’s not as simple as just forgetting about it and moving along. Fear can dwell in the back of your mind and influence your trading without you realizing it! 

Here are some tricks that I do to take a loss and come back with confidence:

1) Take a break

There’s nothing wrong with taking a day off form the screens after taking a loss or having a bad week to get back in a positive mindset. Sure, you might miss some opportunities, but trading is a marathon not a sprint.

Walk away from the market for a few days, clear your mind, and come back fresh and ready to crush things.

2) Do some physical activity

Hit the gym, go for a run, shoot some hoops, yoga, and then chill out.  Having some losses in trading is not the end of the world. The worst thing to do is be a depressed hermit about it!  Go put some hard physical work in. You’ll notice quickly how much your mood will change.

Your mind will be totally clear of negative thoughts, and you can go in and analyze the wrongdoings of the trade from an objective standpoint with a stress-free mind.

3) Talk about it

This is the best thing you can do after some losses with trading. Talk about the loss with your trading partners, talk to your mentor about it, reflect on what you did wrong, and analyze the trade hard to discover what you need to avoid going forward.

All in all, losses are unavoidable. Nobody, not even algorithms, have a 100% win rate. Losses occur, and your long-standing success as a trader depends on how well you control them and take them when they do occur.

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The only way to improve is to understand what happened and why. And the only way to know what happened and why is reviewing your trades! 

As a Fous4 Pro student you have the luxury of having professionals work with you and reviewing your trades together! There’s no better way to improve. 

Joining a system like Fous4 will allow you to have some peace of mind that you have a community of great traders and pro mentors behind you to work through losses, and it will allow you to take Fous4 setups with confidence knowing they have a high probability of success if played correctly. Learn to accept losses as growth lessons and you will be well on your way to profitability.

If you have any questions about getting started, please don’t hesitate to email me personally cameron@fous4trading.com 

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