Stanley Kubrick’s movie comedy Dr. Strangelove or: How I Learned to Stop Worrying and Love the Bomb was released in 1964 at a time when nuclear war was a real possibility and reason for worry.
In the movie a nuclear war ultimately could not be avoided. Fortunately, in reality, such a catastrophe has been avoided. We won’t go into the movie’s plot as it has far too many twists and turns but it contained a few strong messages.
The most obvious was that people in authority, although powerful, are still human and are therefore fallible and subject to irrational behaviour. Even with the best will and all the available power at their disposal a catastrophe cannot always be avoided if there are not fail-proof systems.
But there was another message inherent in the title, albeit much more tongue in cheek. If you know that something cannot be avoided, should you not embrace it?
That may seem overly fatalistic when it comes to nuclear war but there’s a message here for traders.
Accept that the Inevitable Will Happen
Disaster is no more inevitable in trading than are fabulous earnings, unless you act in a manner to bring it about. But, just as in the movie, losses cannot be avoided.
However, for many traders, losses and losing trades are seen as the doom to be avoided. The problem is that this can lead to indecisiveness and a distraction from what really matters: the avoidance of catastrophic losses.
Losses are inevitable but catastrophic losses require that you act in a manner that brings them about. the characters in the movie would not accept small personal losses of power or authority but failed to avoid the catastrophic loss.
When trading Binary Options, you start from a position that you have a 50% chance of winning. That is the case irrespective of the outcome of any previous trade.
If you have a good system i.e. a good way of analyzing the market to identify opportunities and then to time the entry into the trade, then you will shift the odds of success to better than 50:50.
Somewhere in the region of 60:40 in your favour will likely make you profitable, depending on the payout ratio.
The Very Best Systems Always Produce Losing Trades
But it will always remain the case, irrespective of how successful your system may be, that you will have losing trades and that you do not know how any trade is going to turn out. This is the case irrespective of what your indicators are telling you.
So keep away from any system, no matter how sophisticated it looks, that tells you differently. In fact, keep away from any system that claims consistent success over 70%.
You know that almost every second trade will, on average, be a losing trade. Perhaps it will be 1 out of every 3 if you have a really good system.
But you don’t know when that losing trade will appear and you can easily have a run of loses even with a really good system.
So, when you have a loss, welcome it as an inevitable happening and one more loss out of the way.
If you have a good system that shifts the odds towards more wins than losses – and you should not be trading Binary Options if you do not – then it puts you closer to having a winner.
Your methodology should minimize the number of your losing trades and above all minimize the loss per trade. Then embrace the loss and move on.
Losses are a part of trading. The only sure way to avoid them is not to trade. So, you must accept them just as you accept the wins.
Losses are a Welcome Part of Trading
You may even go further and see the losses as valuable. If you keep a good record of your trades and know why you entered each one then you can learn from your losses.
Did you make a mistake? Or was if just normal market behavior or an unforeseeable event?
If you do not accept that losses are an intrinsic part of trading then you will end up doing one of 3 things: avoiding trading, getting emotionally upset when a trade loses, or seeking fail-safe 100% secure systems to avoid the losses.
Only the first option will avoid losses and the other two will actually increase your losses.
You cannot avoid losses, so you must accept them. You’ll never learn to love them and you don’t need to do so. But see if you can embrace them and you will at least accept them for what they are.
Above all, don’t ever put yourself in a position due to excess risk where you are unable to accept the loss. Then move on to the next trade.
Download the Free Trading eBook