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This chapter is from the book

Loss

You are going to have ups and downs in your trading account. Losses are a part of the trading game. You say you want no losses? You want positive returns every month? Well, you could have had your money with the Ponzi-scheme of Bernard Madoff, but we all know how that turned out! Life equals having losses and you’re going to have losses with trend following. “You can’t make money if you are not willing to lose. It’s like breathing in, but not being willing to breathe out.”36

If you don’t have losses, you are not taking risks. If you don’t risk, you won’t ever win big. Losses aren’t the problem. It’s how you deal with them. Ignore losses with no plan and they will come back to haunt you and your account size. Consider:

  • “Theoretically, really big losses rarely befall a trend follower because he eliminates or reverses his position as soon as the market goes against him. A lot of little losses are inevitable...The rationale for hanging in is that any price move could be the beginning of a trend, and the occasional big breakout justifies a string of small losses.”37
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