Willingness to Accept Losses

Here is yet another important quality that the effective futures trader must either possess, acquire, or develop.

Perhaps the single greatest downfall of all traders is the inability to take a loss when it should be taken.

Losses have a nasty habit of becoming worse rather than better. Unless they are taken when they should be, the results will not be to your liking.

Although it is easier on one hand for the futures trader to take a loss than it is for the position trader (since a loss must be accepted by the end of the trading day), it is still the downfall of many a futures trader who is unwilling to accept the loss when it is a reasonable one.

The good futures trader must have the ability to take a loss when the time to take that loss is right.

What is right is dictated by the particular trading system or risk management technique which is being used. I would venture to say from my experience and observations that perhaps 75% or more of all losses are due to the fact that losses were not taken when they were small or relatively small or when they should have taken.

Fortunately, the futures trader has two opportunities to take a loss.

• The first one is at the stop loss point determined by a system or at the predetermined dollar risk stop
• The second point is at the end of the day

A futures trader is therefore fortunate in as much as he or she is forced to liquidate all positions at the end of the day. This will keep losses smaller than they would be if losing positions were carried overnight.