It is extremely important, if a trader is to become effective in profit ac*****ulation, to accept that losses are an integral part of a trader's life. The profits are there because risk exists. With risk being a major component of trading, some will relinquish their capital into the hands of another. With risk, there are going to be losses. Not a trader exists that does not experience loss regularly in this business of trading.

What separate the professional from the novice trader are the understanding, and the acceptance, of risk and losses. Even when a trader comes to realize that losses will always be there, the emotions that surface within the novice each time losses are handed out usually inhibits productive thought and subsequently produces erratic, poor performance.

It is important, if a novice trader is to grow into the mold of a professional, is to accept losses as part of the equation for success. Trading losses should be viewed in light as that of tuition, or even insurance. Most traders, during the course of their life, have paid for education in some form or fashion. We find ourselves dolling out cash for something that resides in our minds, knowledge, intelligence and experience. The cash is gone, yet we accept it as necessary and a very important part of our journey towards improved living.

Insurance is much the same way. All over the world, people are spending billions of dollars buying insurance of many forms, home, life, personal property, cars, etc. For most individuals, we actually hope to never have to see the benefit of our insurance purchases, other than the knowledge of knowing we are protected.

These are two life examples of where we gladly accept the depreciation of our cash assets without an immediate receipt of material assets. With our eyes into the future, we are willing to part with our capital now.

Trading losses should be viewed exactly the same way. Negative emotions are no part of a professional trader's view of losses, as celebrating and getting excited are no part of a professional trader's view of winnings. Components, losses as well as wins, are simply all part of the function we call trading.

However, the professional trader understands that to make losses an acceptable part of trading, they must be properly managed. To allow losses to overpower wins is a formula for disaster. For many novice traders yet to embrace losses as a positive part of trading, the underlying reason usually stems from poor trade management. With a proper understanding of managing risk and losses, the novice trader can soon move into the coveted position as one called a professional.

The first thing a novice trader needs to do in preparation of gladly accepting losses is to keep them small. When a trader has found a comfort level with a chosen method of trading, advance preparation is required to define the action to take in case the trade does not turn out as expected. This should never be done after the trade is on, as decisions as to when and where to exit often times are distorted by panic, fear and/or greed.


MONEY MANAGEMENT
Without proper money management, successful trading is impossible. Ac*****ulated wins can quickly vanish with a single losing trade. If the novice trader is to learn to enjoy taking small losses, money management must be practiced with dogmatic intensity.

There are several schools of thought on how to apply money management to trading, and it is beyond the scope of this article to cover them all. However, assuming the trader has a good trading method to begin with, a simple and effective approach can be offered here.

To determine the maximum risk you should take on any trade, divide your total account by 10. This is your risk amount. It is best that you actually look to risk as close to that amount as possible. In other words, if your account is $10,000, your trade risk should be as close to $1000. This does not imply on a single contract, however. If your method suggests a $500 risk per contract, then you would trade two contracts. Without knowing the readers method of trading, it would not be possible to provide details on how much to risk per contract. Using the simple rule of thumb of never risking more than 10% of your account on any trade will provide you with ample opportunity to make a success.

STOP-LOSS
Keeping losses small is extremely important towards accepting them as a favorable part of trading. A good salesperson knows that a series of 'no' will be necessary to sustain to get to that 'yes'. It is that 'yes' that will overshadow all those 'no' answers preceding. The good salesperson knows that after every series of 'no' answers comes a 'yes'. It is a given in the sales profession. Likewise, the professional traders knows that at times a few 'losses' will lead to a 'win'. As long as those 'losses' are small, manageable losses, the trader will be able to reap the benefits of the wins that follow. With this in mind, the trader should enjoy taking small losses as they lead to those coveted wins. Each small loss should be viewed as getting close to achieving the goal of profits.

To keep losses small, a stop-loss order should always be placed once an order has been filled. It should never be removed, nor should it be moved to increase capital exposure. The only time a stop-loss should be moved is to follow a trade, capturing profits based on a well thought out plan. Therefore, keep your losses small by using a stop-loss order at all times.

Hopefully now that you have read this article, you can see how enjoyable taking small losses should be. Never should the thought of getting closer to that big win be a reason for discouragement or despair. Even a new salesperson has to go through a period of mental adjustment, looking at rejection as a positive thing rather than a negative one. This is the same for the novice trader.

Start off by systematically dividing your account into risk amounts and sticking to that formula. Use stop-loss orders religiously, never removing or adjusting them to increase risk exposure. By keeping losses small, and keeping in mind that every time you get one or more small losses you are that much closer to a successful trade, you may one day develop the healthy attitude of the professional trader, the joy of taking small losses.

Note: About the Author
Rick J. Ratchford is President of ProfitMax Trading Inc. He is a full-time commodity trader for his own account as well as assisting other traders. He has been a computer programmer for more than 20 years and a trader since 1990.