Let that sink in. Take a deep breath. And read that again.
There is always the next trade.
Trading is a process. Even if you take only one trade a day, every trade you take is one trade among tens of trades you will take in a month among 200 odd months of your trading life.
It is just one trade. Don’t be attached to it. It is okay to miss it. It is okay to pass it.
Why am I saying this? How is this of any consequence? Here is how.
When you have only one chance left, you tend to give it your best effort and take your best shot. Kind of “go all-in” It is a great thing to give it all in situations like a job, or saving a relationship, or winning the final of a tournament.
But it is a horrible idea in trading. Here is why.
You can try hard and control the outcomes and results with jobs, relationships, finals etc. But there is no way you can control or influence the market. (Unless of course, you are Goldman Sachs, The London Whale, or Warren Buffet. In which case, I have a question. “How did you even land up here?”)
Trying hard in trading could incorrectly lead to holding on without a stop-loss, or increasing the bet size. Terrible ideas. Very. (By the way, trying hard in trading means only one thing — learning, analysing, spending time after the market close to discover opportunities, etc. Not betting more.)
You do not have to rescue or save your current trade. It means nothing to you. You can always let it go and wait for the next trade if the losses are small. Just get out of the trade and wait for the next trade. There is always that next trade.
This also makes it very important to get out of a trade with a stop loss early on when the losses are low. If they become big, it will become difficult to get out. You will get into the mentality of rescuing this trade. You will get attached to this trade. Your emotions will start playing if losses increase, and your decisions will suffer. If losses increase, you might not have the capital for that next trade. Let it go early. There is always the next trade.
You might not get a second chance with jobs, relationships, finals etc. But there is always the next trade. Always.
Remember, your objective is not to make money from your current trade. There is nothing you can do to control that. Your objective is to make money from all your trades, cumulatively, over your lifetime. The market gives you enough opportunities. There is always a better, safer, more profitable trading coming your way. So why risk your hard-earned money on low-quality poor trades you are not very sure of?
Here is how you practically implement this philosophy:
Every time you are about to take a trade and are not 100% convinced this is a good idea, remind yourself that there is always a better trade to come. Take a deep breath, tell yourself there is the next trade. And let this uncertain one pass.
Every time you want to exit or stop loss a trade, remind yourself that there are many more trades to come, and you can let this one go. Take a deep breath, tell yourself that there is always the next trade. In the long run, this keeps your losses small.
Make it an active thought. Tell yourself, “There is always the next trade.”
Tailpiece: An old trader friend of mine used to say about another topic (yes, that topic).
“There is always a next one. Think of this like a crowded local train in Bombay Central station. If you chase the train or try jumping in without thinking, you are taking risks and chances are that you will break your back. Let this go. We can always take the next train. We will eventually get there”