Why financial losses should be seen as costs
I want you to stop thinking of trading losses as losses.
It’s having an effect on you emotionally and is stopping your full potential of growth.
Financial trading, like any other business or aspect of life, involves costs.
That’s just life.
In business, there are costs associated with equipment, rent, salaries, taxes, and legal fees.
In our personal lives, there are costs associated with household expenses like rent, groceries, insurance, medical fees, taxes, and repairs.
Similarly, in trading, there are costs associated with normal losses, daily interest charges, and drawdowns.
It’s crucial to remember that losses are an inevitable part of trading and should be viewed as a necessary cost of doing business.
Just as a business owner must invest money in equipment, rent, and salaries to run their business, traders must also be prepared to invest money in losses in order to be successful in the long run.
If you try to avoid taking a trade, because you are worried about the loses, you will miss out on the greater rewards for when profitable trading opportunities come your way.
When you see trading losses as costs…
You will be able to take a more objective and strategic approach to the trading decisions that you make going forward.
This can help you to minimize losses and maximize profits over time.
So there are few things you need to do to mange your costs (losses) emotionally and physically.
Action #1: Set realistic stop losses
Place your stop loss with every trade and never risk more than 2% of your portfolio per trade.
Action #2: Understand the concept of Risk to Reward better.
The risk-reward ratio is the ratio of the potential profit of a trade to the potential loss.
By understanding the risk-reward ratio, traders can make more informed trading decisions and can better manage their risk.
Action #3: Don’t feel your losses
If you feel 2% is too much to risk, risk less!
Get to the point with your life where a loss isn’t that much as with where the reward isn’t worth celebrating.
Overtime, you’ll slowly grow your account and your mind too.
If you enjoyed this article let me know.
Trade well, live free.
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