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A quick hit: Winning while losing

Jay Kaeppel
2025-07-08

Key Points

  • Just a short "thought piece" for today
  • Losing trades are a "fact of trading life"
  • How you manage losing trades - both financially and psychologically - will ultimately determine your success as a trader

Your #1 job as a trader

For the record, I come from a futures trading background. So - to paraphrase - I've seen some "stuff".  I've seen people go from rags to riches.  And I've seen people go from riches to rags.  And yes, sadly, I have seen people do both.  This experience is the reason why Rule #1 goes like this:

Jay's Trading Maxim #1: Your #1 job as a trader is to be able to come back and be a trader again tomorrow.

Sounds pretty obvious.  But the reality is that once you take a huge hit financially, it becomes exponentially harder to bounce back financially and psychologically (Foreshadowing: The key is to avoid the huge hit in the first place).

I knew a commodity broker many years ago, a guy in New Orleans named Mike.  And despite being a commodity broker, he was a great guy (go figure). Anyway, whenever he opened a new account, he would offer the new client his "Trade Guarantee".  It went like this - "I guarantee you that there will be losing trades."

This was probably not what a lot of people wanted to hear, but the truth is that he did them a gigantic favor by properly setting expectations.  This also dovetails nicely with:

Jay's Trading Maxim #5: It's not how much you make when everything goes right that matters; it's how much you keep when everything goes wrong.

The elephant in the trading room: Losing Trades

Let's be blunt, losing trades suck.  Financially, of course, but even more so sometimes mentally.  When you put a lot of time, effort, and energy - not to mention your "best thinking" into finding just the "right" trading opportunity, and then you get into a trade and the market laughs in your face and almost immediately runs in the wrong direction - it hurts (especially if you don't cut the loss at a manageable amount).  Well, at least if you let it.  Which leads to:

Jay's Trading Maxim #16: What happens to your account equity during a losing trade can impact your ability to trade effectively in the near term.  What happens between your ears during (and following) a losing trade can affect your ability to trade effectively in the long term.

Which leads to:

Jay's Trading Maxim #33: Successful traders, a) control risk ruthlessly, and b) have short memories when it comes to losing trades.

The bottom line: What separates the majority of successful traders I have encountered over the years from everyone else is their willingness to spend more time thinking about, preparing for, and planning to mitigate the effects of a losing trade-and then not giving a second thought to a properly managed losing trade once it is over.

Which leads to:

Jay's Trading Maxim #26: The day you experience absolutely no emotion as you are stopped out of a properly managed losing trade is the day you gain the potential to become wildly successful in the markets.

Think about it.