f you plan on trading profitably one thing you have to learn how to do is take a loss on a trade. Obviously no one wants to lose money but the fact is when trading you will have trades that are losers. That’s the nature of the beast.

In fact, the psychological/emotional issues we all have about losing money and our inability to cope with them is one of the primary reasons traders end up losing all of their trading capital.

Many traders will set a mental stop for a trade and when that stop gets triggered they make a rationalization that keeps them in the trade. They will tell themselves that they have a good feeling about the trade and will bend the rules “just this once”.

What almost always happens is that the trade continues to deteriorate and the losses keep growing. Now they say they will get out if it drops x points more or if it rebounds to y they will sell.

They yearn for the option to exit the trade if it could just get back to break even. That would make them happy and they would settle for not making any money on the trade.

I might mention here that hope and gut feelings have no place in trading and as soon as you change the rules on an open trade you have in effect begun a new trade with new rules. Think about it.

Have you ever said these things to yourself? I have and almost every time I “bent the rules” I paid dearly for it.

Losses of $1,500 soon become 4 and 5 times that. You do that a few times and you soon learn a very painful and expensive lesson…

Stick to your exit rules. Play by the book. Follow your system and trading plan.

There, I just saved you thousands of dollars if you will just listen.

The best way to overcome this anxiety of losing money trading is to think of it is a cost of doing business and trading must be treated as a business.

Just as a grocery store will have to throw away spoiled food and take a monetary loss so you too will have to get rid of a trade that has gone bad.

Keep that in mind along with the old trading saying that the first loss is the best loss and you will be on the right path to trading success.

I remember buying a stock market game when I was a kid and playing it with my sister (I think she still has it). While it was fun it was really just a version of Monopoly and didn’t actually teach me anything about trading.

If you really want to learn stock market trading there are two schools of thought as to how you initially approach the markets…

First, there is paper trading where you simulate your trades and record them either using paper, a spreadsheet or computer program.

The second method is to use real money and just start trading once you have developed your trade plan and have all of your trading tools in place.

Now, many people will strongly advise that you paper trade for some time before risking real money while others say that this makes little sense as you never know how you will react until you are tested by fire and have real money at risk.

I fall into the latter group and don’t paper trade because it is too easy to do. By that I mean that your emotions are not a factor when you are using “play” money and until you have real cash on the line you won’t know how you will really do as a trader.

In recent years there is a new method of learning to trade that goes by many names and is a nice bridge between paper trading and actual trading that you might want to consider…

Fantasy stock market game, virtual stock market game and online stock market games are just a few of the terms used to describe these new stock market simulation games that are web based and often free to join.

I have been looking at one of these free stock market games called Wall Street Survivor that not only allows you to sharpen your trading skills without risking your capital but also lets you win prizes while doing so by competing against other traders.

For those of you that don’t want to risk your money while learning to trade I would take a look at Wall Street Survivor. Hey, it’s free and you just might win something.

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Before we begin let me ask you this question…

If the last 3 times you traded stock XYZ you lost money and now you are getting another buy signal for XYZ do you take the trade or pass?

Now for the lesson…

I produce a fair coin from my pocket and flip it in the air and ask you to call heads or tails. You call heads and sure enough heads comes up. We do this 9 more times and each time the coin comes up heads making you a lucky winner 10 times in a row!

Now what are the odds that the next time I toss the coin it will come up heads again?

Do you have your answer?

I hope you said the odds are 50/50 as each time the coin is tossed it is a brand new independent event with no relation whatsoever to the prior tosses.

In fact, the odds for each coin toss was always 50/50, it can either be heads or tails that’s it. Prior flip results have no influence on the next toss of the coin, you just happened to get lucky with 10 heads results in a row.

Now let me ask you this…

Do you take the XYZ trade or pass?

Sometimes the simplest trading lessons are the best