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You know the difference between winning and losing trades -- we've all experienced both and know the joy and the pain well.

But, when we look at losing trades, most of the times it's not the strategy that has failed but, rather, the trader.

Yes, that probably means you. But, today I'm going to talk about how to stop losing money and become a winning trader. Before you even place an order, deciding where to buy or sell is always connected to where you place your stop-loss order.

No discussion of position entry is complete without a thorough explanation of stops. But I'm left to wonder why so few investors use stop-losses. If you're guilty of not using stops, you need this information. It might just mean the difference between retiring on time with a healthy nest egg or retiring later and still just "scraping by."

By planning and placing stops you plan to win, but prepare to take losses and still live to trade another day. So we need to look at the trader psychology around taking losses.

All professional traders understand they must know where they are getting out before they get in. They have to know ahead of time what a wrong trade looks like so they can exit it quickly. This is a rudimentary fundamental that EVERY professional trader knows the answer to.

Can you answer the following questions?

1.) How do you know if you should sit tight or cut your losses?

2.) Do you have a rule to tell you when to sell a losing stock?

3.) Do you have a rule of when to move your stop to breakeven?

If you can't answer these questions, you're not alone. And what it means is that you need to establish some rules for yourself, especially when you go to short stocks. But, all the trading rules in the world are meaningless if you don't use them. That's why you and I need to "talk turkey" about what's really going on with you when you refuse to manage your risk in a proactive and professional way.

Many investors refuse to take a loss for two basic reasons:

1. They can't admit they're wrong.

A realized loss is a great big unavoidable acknowledgment of wrongness. For many traders, this is just too painful to admit. It's interpreted as an allegory for a total life failure or feeds a persistent, negative self-image.

They personalize the loss and experience emotional pain. Many traders prefer to remain in denial instead of acknowledging their losses are causing them pain. This type of trader often has to lose it all before he begins to change (or gives up trading).

2.  The losing position is too big relative to their overall portfolio value so they can't afford take the loss.

But in reality, there's no such thing as just a paper loss. The stock (bond, option) is worth what it's quoted and the loss exists whether you realize it or not.

Both of these examples are a form of self-delusion that millions of investors, both large and small, suffer from. Just look at AIG, Merrill Lynch, WAMU, Lehman, etc. ... and you can take comfort in the fact that self-delusion is no respecter of income bracket or social standing.

If this article is making you uncomfortable or bringing up feelings of anger or powerlessness, then that's a good sign. It means you have enough self-awareness to change.

The winning trader uses a different strategy from the losing trader by regarding the pain from the loss in an impersonal way. They use the loss as a sign that something went wrong with their approach, or their execution, but NOT that something is wrong with them.

Winning traders separate who they are from what they do. They know, or learn, that their trading faults lies in their approach or their skill level but not in their fundamental worth as a person. The pain they feel is quickly transmuted into motivation, which fuels their desire and determination to become a better trader.

Both are learned responses and within your control. The opportunity for growth from the pain of losses is the same. It's what we do with the emotional pain of a loss that matters, not the loss itself.

Stick with my proven ETF Trend Trading system and make winning a habit. Study; ask questions and monitor your position size relative to your portfolio and you will end up on the winning side more often than not.

My constant reminders about proper stops and risks are one of the strongest parts of my one year mentorship program. Even after you understand my system 100%, it's still good to hear me tell you, Don't move your stop or Be sure to take profits when the system says to, not too early and not too late.  Most my students like the mentorship part as much or even more than the course itself.

To slow and steady growth,

Big A

www.ETFtrendtrading.com

800-743-0385