
Ask HN: Any of you took a loss while trading? How did you handle it? - rootsudo
For me, it was yesterday on GDAX.<p>What are the best ways to improve myself over it?<p>The amount loss wasn&#x27;t much, but stings.
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thiagooffm
I suggest you don't trade and instead focus yourself on growing your assets by
working and doing value investing.

Trading is a 0 sum game. It's the same as playing in the casino. The only one
who makes money consistently with trading is:

. your broker

. people holding illegal priviledged info not released yet in the media

. big funds, tricking people like you

In the long term, the value of stocks follow the profits which companies have,
If you manage to learn how to do value investing, slowly and calmly, never
really selling the companies you commit yourself to, while focusing at your
work(which usually pays way more than what you can earn in the stock market).

I think generally people are addicted to losing, to having the thrill of
winning/losing something, but when actually, if you want to get rich and
consistently become wealthier, there's no thrill and it's a quite boring road.
It's up to you which one you could take. The internet is full of forums with
crazy people which pretend to be traders and winners but they are all actually
addicted to the thrill and losing. Just check how much people are crazy about
failed businesses and penny stocks. I wouldn't bet my money or even less
something more important: the peace of my mind into this crap.

I want you to answer me a question: how anxious are you? I think a lot. You
even came to HN to talk about your loss. I think you are one of the people who
will never win on this game, but can actually win in life. You just need to
learn how to control it.

I've been managing to grow my assets slowly for years. Have been enough time
in the market. If you want to know more, shoot me an e-mail. I won't tell you
what stock to buy, but guide you so you can make your own choices. I can
already live a few years without working, but I'm so satisfied with my life
that I don't have to. I travel every year and so on... and don't even make
that crazy software dev salary some people in the US can.

Also... practice Sports. The more you live, the more money you can make.

I used to be very sick about trading and so on. Now I'm healthier, wealthier,
less anxious and everything.

~~~
afarrell
> practice Sports

Why advise this rather than focusing on core exercises to build injury
resistance and a healthy metabolism? Is it just that in your experience,
sports are a good way to motivate yourself to keep to an exercise regimen? Or
something else?

~~~
thiagooffm
I said it in general, some people find one or two things boring, but generally
there's at least a sport or something that involves physical activities that
they do like. I advise them to do it.

The main issue is that people don't exercise regularly, while investing and
thinking about their future, when that actually makes they live less and also
reduce their potential investments returns(as yield doesn't beat time)

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bsvalley
#1 - Money/Risk management. You need a stop loss and a price target. Before
you take a position on the market, know exactly how much loss you're wiling to
take. Know exactly how much gain you're targeting. When you reach any of these
2 numbers, exit. Always stick to this strategy and you'll end up positive.
Yes, you won't win the lottery, but this is how the pros do it. For a given
position, on average people go for +5% gain then -3% loss. On a 50/50 scenario
you're always positive over the long term.

#2 - Gain maximizer. Sell only half of your position on a winning trade when
you reach your target point. You're covered in case it goes down (still need a
stop loss). Then if it goes up it's all good :) Make sure to setup a second
price target to exit. Always stick to rule #1. If you hang on to your stocks
with no target price - like your average Joe - you'll go negative.

Welcome to the market.

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ParameterOne
I lost $30,000 in two weeks trading options and futures. It seems like a
considerable amount but that account was started only a couple months prior
with $5000. For me it was fantastic and extremely depressing all at the same
time. Unlike most people I don't mind great risk for great reward, and I
always learn something. The things I know now are worth more than the 30k
lost. That's how I handle it, knowing that I now have possession of
information worth more that the amount lost....which means I can duplicate the
performance at any time.

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andriesm
I have dabbled many times over the last 20 years in trading and even done it
rather professionally. There is no easy way to handle a loss. Take comfort in
the story of a Ray Dario having lost everything to the point of borrowing 10k
from his dad to get back on his feet and now managing 10s of billions.

Trading is a really hard way to make money.

The best way to bounce back from a loss is to make sure you will never ever
place yourself in the position to make the kind of loss from which you can't
recover.

You did this, now never ever do it again. There is no sense in trading unless
you have a provable long term edge.

Most people would say good luck at this point. I would instead say, re-
evaluate if trading makes any sense. Why do it?

Are you willing to spend 20 years "mastering it" only to accept one almost
never truly masters the strangeness of financial markets, but perhaps develop
a bit of character and pick up some sound principles and some unique chance
insights for which there are no shortcuts.

~~~
h1d
When you learn index funds aren't any worse than actively managed funds, you
realize no matter how much you learn, it's nothing.

It's better to learn how to handle losses psychologically and just find
something worthy and wait on it in the long run.

~~~
tedmiston
It's certainly a personal risk tolerance decision as well balancing high-risk
individual trades with indexing.

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tedmiston
I only think about the percentage loss (and invest money I can afford to
lose), and then buy and hold more often than not.

From my "fun" portfolio personally, which is mostly tech stocks, there are
many small losers but a few massive winners that outweigh the losses. When I
was trading on a daily / weekly basis I never saw this, but after holding for
quarters it's become my new approach. Instead of checking daily, now I check
the numbers every few weeks.

If it's any consolation, I got started with investing in the 3 months before
the housing crisis in 2008 and watched 50% of what I invested in relatively
stable funds disappear basically instantly. That was depressing but in time
all of them came back. For longterm, you've really gotta trust dollar-cost
averaging and just waiting out the bumps. After surviving that rough
introduction, everything else feels minor.

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nicholas73
I don't handle it, as it's always hard, but it's easier to take a loss if you
go into a trade knowing what could invalidate your thesis. This is either from
further research or the price action. Once you can admit the jig is up, and
you are convinced the price can fall further, then it's easier to cut the
loss. Then, it feels like you've made the right decision and you can move on.
A kind of moral victory.

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hvd
Risk Management. No more than 5% of your portfolio in a single company. No
more than 25% of your portfolio in a single sector. A stop loss strategy. An
exit strategy. The best investors in the world generate 20% returns year over
year consistently. Don't be greedy.

Read The most important thing - Mark Howards.

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peller
From a trader's perspective, losses are the cost of doing business. When
you're starting out, your losses are your tuition. An engineer spends at least
$100K+ and 4+ years going school to learn their craft; why should it be any
different for traders? (Aside from the fact that there's no school and no
curriculum; there's only the library, the market, and your wits.) If you read
the Market Wizards series, you'll find a lot of pros saying things that amount
to "on average out of 10 trades 6 or 7 of them will be losers - but I keep my
losses small and let my winners run."

Here's how it works for a casino: the outcome of any given roll of the dice
(say) is random. But over a thousand rolls of the dice, the odds of the game
are not random. For a casino, obviously the games are set up so the odds favor
the house, and "in the end the house always wins." For a trader, your "odds"
against the market are determined by your skill. Every individual trade is
still essentially random, but if you're good at what you do - if your market
analysis, entry timing, risk/money management, and adherence to your trading
rules is solid - over a large enough sample size the outcome will be net
positive. It's a strange duality for some people to grasp.

A good first read: High Probability Trading (Marcel Link)

The Bible: Reminiscences of a Stock Operator (Edwin Lefevre)

The basics: Technical Analysis of the Financial Markets (John Murphy),
Japanese Candlestick Analysis (Steve Nixon - skip the first chapter), Trading
and Exchanges (Larry Harris)

Good follow ups: All the Market Wizards books (Jack Schwager)

Psychology: Trading in the Zone (Mark Douglas), The Nature of Risk (Justin
Mamis)

Less theory, more practical: Mastering the Trade (John Carter)

Putting it all together: How to Buy (out of print) and When to Sell (both
Justin and Robert Mamis; slightly outdated but 100% worth reading.)

Some of these books are "expensive." But even if you only learn _one_ thing
from a book, it'll have paid for itself 10 times over. Take copious notes.
Find the commonalities. Filter out the bullshit. Watch the markets; see what
"clicks" for you. The trading exercise towards the end of Trading in the Zone
is a great way to test yourself without risking a whole lot. (On that note, a
theme you'll find, if loosing 2 or 3 thousand is going to be an issue for your
current well being, perhaps better to wait to put money up until such a cost
is somewhat closer to pocket change...)

If that all sounds like too much effort, then perhaps the more typical buy
index funds and hold until you retire answer you'll often get around here is
more your speed. No shame in it.

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SirLJ
Before you start trading, do extensive back testing, especially on the risk
management... also please note, you'll allways have losses, but if you control
them and have a system with slightly better winning percentage, the
compounding will make you rich in the long run...

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swah
Bought treasury bonds instead (Brazil).

