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Message: [QUOTE="{0v0}, post: 197681, member: 39887"] Understanding the role of losses in trading is very important. It is not a negative issue, it is an integral component of what we do. Whatever instrument we choose to trade we are all actually trading the same product - probability. Any market can only move in two directions (standing still is not a movement) i.e. either up or down. It is not difficult to design a strategy to identify entries but whatever strategy we build it will produce both gains and losses. This is inevitable because all entries are based on an assessment of its probability of being correct - and therefore sometimes it will be wrong because the probability is never 100%. But this does not matter at all. One cannot make profits without being in the market, and being in the market means losses. This is exactly the same principle as any business. There are always overheads/costs involved in any business and the objective is to ensure that the profits are greater than the overheads. We need to think in terms of [I][B]net [/B][/I]profits over time. But this is where, I think, many new traders go wrong. Whenever losses occur there is a tendency to blame the strategy and try to add more and more indicators in an attempt to "plug the leaks". The end result is an overdose of chart info and indecisive signals. A better approach is to accept the inevitability of losses and focus of money management instead, keeping exposure within acceptable limits and optimising the gains from the winning trades, etc. Naturally, it is also important to monitor one's strategy and identify weaknesses or possible improvements and/or adjustments due to changing market structure and behaviour. But this is not normally a very frequent process and is not intended purely as an attempt to eliminate losses, rather it is an optimisation process to minimise "overheads" and maximise profits. [/QUOTE]

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