Are you having trouble mastering the markets? Do you have trouble taking losses? Do you react to potential losses with fear or regret? Do you find that you can’t seem to methodically execute trading plans and take-home profits? If you are having some difficulty accepting losses, and mastering the markets, you are not alone. For every one trader who becomes a Market Wizard, there are at least nine who don’t. You can react to this knowledge in two ways: you can walk away in defeat or you can be determined to become one of the few who become a master.


There are two hurdles to overcome on the road to mastering the markets. You have to overcome your biological predispositions and override past learning experiences. Your biology and past learning in most cases protect you, but when it comes to trading, your natural biological urges and your past experiences may work against you. Biological reactions and past learning experiences work hand in hand to protect us, for example. Let’s look at taking losses easily as one such example.

When we touch a hot stove, we recoil out of fear to minimize damage to ourselves. Similarly, we carefully avoid spending money in our personal lives to avoid mounting debt that will be difficult to pay off. These past experiences protect us for the most part, but mastering the markets requires that you control biological reactions and modify past learning experiences. Rather than fear, you must practice staying calm in the face of danger. In addition, you must modify the rules you’ve followed throughout your life, such as taking chances with money and learning to think that losses don’t matter.

Intellectually, you know you have to risk money, control your impulses and emotions, and make logical decisions to trade profitably. But this is easier said than done. You naturally will get excited when you make a winning trade, naturally, feel disappointed when you lose money, and naturally, closeout trades when you perceive the market is about to move against you.

You are human, and it is hard to fight human nature. Depending on your past experiences, temperament and personality, you will want to seek out solace from others when you lose, and if you have been successful in life, you have assiduously followed the lead of others and tried to adhere to social norms. Master traders, however, tend to act differently than most humans. They look inward for direction. They are not afraid of taking risks, even if it means hurting themselves in the end. Throughout history, famous traders, investors and business leaders have had tremendous ups and downs in their lives.

Unlike most people, though, they bounce back and seem to take even the biggest setback in stride. You probably know this, but knowing this is often of little help. You are who you are. There is nothing wrong with that. Everyone has his or her own unique history and you have to appreciate yours. Unfortunately, that may mean that you won’t be a winning trader tomorrow or even next year. But the good news is that if you work hard enough, you can overcome your biology and past learning experiences.

How do you do it? You must do it gradually and work hard at it. If you have trouble taking chances or recovering from losses, for example, minimize the chances that you do take. Accept your own personality. Don’t make big trades where you risk twenty per cent of your capital on a single trade, for example. Risk only two per cent. Practice taking losses in stride; with every loss, practice telling yourself, “Losses should be expected. I’m not going to let it bother me.” If you are like most people, this isn’t going to work very well. The loss will gnaw at you. Again, it is natural to be bothered by losses. Your past learning has taught you to be bothered.

If you were not bothered, you would have never been able to save enough capital to trade. These beliefs and biological reactions were adaptive throughout your life, so you can’t expect to break free of them easily or quickly. It will take practice, and with enough practice, you will change. With each small losing trade, you will learn to accept the painful feelings of loss. You have to practice telling yourself that painful feelings of loss are a fact of trading life.

Practice looking at the loss with a third eye, as if you are looking at yourself as if you are a character in a movie. Pretend it isn’t real money but Monopoly money you are losing. Over time, your perspective will change, and you will start to learn to accept losses more easily. You can’t overcome your natural inclinations overnight, but with a commitment to change and with practice, you can make significant changes and become a master trader.

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