A 6% Loss Can Still Be a Winning Trade
Last month I closed a trade for a 6% loss. It was one of the best trades I made all quarter.
That sounds backwards. It isn’t. The setup wins more than it loses over time, it was sized correctly, and I exited exactly where the rule told me to exit. The market just didn’t cooperate that day. Nothing about the trade was wrong except the number at the end.
Most traders can’t hold those two ideas apart. They collapse “I lost money” and “I made a mistake” into the same event. Annie Duke, the former professional poker player, has a name for this. She calls it resulting — judging the quality of a decision by how it happened to turn out. It’s the single biggest reason smart people stay bad at trading.
Think about a roulette table. American roulette carries a house edge of about 5.26%. On any single spin,...
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