Accepting Losses
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Losses are an unavoidable part of trading. A losing trade does not automatically mean that the decision was wrong, just as a profitable trade does not automatically mean that the decision was good.
Loss as a Business Outcome
When a trade follows a valid process and the predefined risk is respected, the loss is part of the statistical distribution of outcomes. Problems arise when we refuse to accept a planned loss and start moving stops, adding to losing positions without a rule, or abandoning the trading plan.
Process Over Outcome
Our task is to evaluate whether the trade was executed according to the rules and whether the risk was controlled. This separates decision quality from the random outcome of a single trade.
Key Terms
Loss acceptance, planned loss, risk, process, outcome, rule violation.
Knowledge Check
- Does a losing trade automatically mean the decision was wrong?
- What can happen when we refuse to accept a planned loss?
- Why should we separate process quality from trade outcome?