I love to lose money!

There are so many books written on how to make money in the market.  However, what you don’t see often, however, are books or articles written on how to lose money.

“Cut your losses short, but let your winners run” is common sense, but how do you determine when a position is going to be a loser?

Interestingly, a lot of investors and traders don’t have an answer to the above question. Their focus is on getting in at a good price, but they don’t have a clearly defined place to exit, especially if it goes against you.  I mean let’s face it, would you buy a stock if you expected it to go down?

One of the real culprits, I believe, is in the separation of the reality of a losing trade with the sense of feeling like a loser. At some level, we often equate losing in the markets with being a loser. This can frustrate, depress and heighten anxiety and may interfere with your future decision making abilities to take a trade, particularly when your system says re-buy the same stock!  Once bitten so to speak…

The late Everett Klipp (1926-2011), who was dubbed the “Babe Ruth of the CBOT”. Once said, “You have to love to lose money…It’s against human nature what I teach and practice. You have to overcome your humanness.”

Klipp’s system was quick to take profits, but even quicker to take losses (hence the loving to lose money). Instead of viewing losses as a threat, Klipp treated them as an essential part of trading. He believed that taking a small loss reinforces a trader’s sense of discipline and control. Small losses are not failures, only the big ones that could have been prevented.

So all together now, “I love to lose money!!!!”

May today be a profitable day…for all of us.

John