Wake Up and Smell The Thorns

There is an ancient saying that states something that I believe has deep relevance to trading, as well as life in general. “A thorn, lodged in your foot, often requires another thorn to get it out.” This sage saying also holds true in the medical arena. The antidote for certain diseases and ailments is often derived directly from the ailment itself.

I have found that in the field of trading the markets, it’s no different. At times, losing trades can often serve as a solution to a trader frequently losing. I know this may sound strange, but here me out a bit. What I’m about to reveal to you is going to require a paradigm shift in your thinking. To some, it may even appear to be preposterous, but mark my words.  It could be the very thing needed at this stage in your development. It could be just what the doctor ordered to help catapult you to the next level in your market play. So read on.

Losing is Winning…At Times

Now, what exactly do I mean by, losing trades can often serve as a solution to a trader’s losing trades? Well, I mean literally what that statement says. Sometimes a trader is so focused on trying to find out what works that they forget that it’s far easier to find and discover first what does not work in the market. And losing on purpose, speeds up this process. Yes, you heard me correctly. Losing on purpose can speed up the learning curve involved in discovering what one should not do. Once you eliminate what should not be repeated, winning flowers automatically. It’s strange, but you can’t go directly to winning, because winning is not a place or location. There is no path to it. It just “becomes” when wrong action ceases. So doesn’t it make sense that the first step is to find and discover what is truly wrong first?

Let’s think about it this way. Your winning trading actions are being camouflaged by a whole host of incorrect trading actions. You can’t find the winning actions because the incorrect actions are greater in number than the winning actions. So, in order to get to the bottom of the pile, where the winning actions are hidden, you must start getting rid of the pile of things on top of it, namely the wrong actions producing the bad trades. But how does one know for sure if something is truly a wrong action and should be discarded? Don’t even the wrong actions, sometimes produce winning trades? Yes they do, so it’s not as easy as it seems at first, but it’s far easier than trying to find what is right in the midst of the sea of things wrong. We must first diminish the wrong and the right emerges by itself, clearly and effortlessly.

So below, I detail an exercise for those who feel as though their trading journey so far has brought them to the point where they must separate the wheat from the tares, the good from the bad, by first isolating what is bad.

The Bad And The Ugly

Here is an exercise I would encourage those in a trading slump to practice for a period. It need not be an elongated period of time. A full day is all that is needed for those who trade actively intra-day. A week or two will suffice for those who play the market more long-term.

Exercise 1

Take a trading tactic in your arsenal, preferably one you feel is your most reliable, and on purpose use it to produce three losing trades in a row. I mean, really try to mess it up in a way that it guarantees a loss three times. Do whatever is necessary but you must get three losers in a row. If you get two losers and then one winner, then you must start from scratch. It does not count. No interrupts in the losing are allowed. Three in a row or begin again.

Now, after trying this for a while, what do you suppose you’re going to discover? You haven’t guessed yet? Well, I’m going to tell you. You’re going to quickly find that you can’t even lose right (laughter). You’re going to say, “Darn it, Oliver. Even when I want to lose, I can’t even get that right.” And for some of you, you’ll begin to experience what it truly feels like to do the right thing.

You see, to force a paradigm shift, to create a much-needed change, we often need to do the unspeakable. Often times, that’s simply making a 180° turn and going after the very thing we are so desperately trying to avoid. Trust me. It works.

Here is one more exercise that will prove useful, when trying to break a losing streak or pull yourself out of s slump.

Exercise 2

Purposely violate one of the most sacred rules in your trading plan with the idea of producing three losing trades in a row. For instance, one sacred rule of mine is to never buy a stock that is up 5 or more bars in a row while being far above its 8- and 20-period moving averages. The move is too far gone, overdone, and very ripe for at least a temporary pullback. So this is one of those sacred rules of mine I never violate.

With that being said, I really like this exercise because it often exposes faulty rules masquerading as golden ones. It’s amazing how some traders are cherishing certain rules as golden when they really should be considered trash. The bottom line is this, however. If you have a hard time producing three losing trades in a row by violating a sacred rule of yours, then it ain’t sacred, period. In fact, if it won't lose three times, it becomes the opposite: a money making winning rule.

Try these two preposterous excesises out at times and watch how losing or at least trying to lose can lead to more consistent winning. Report back to me with your progress.

And Remember, I’m forever here for you.