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Don Kaufman here. |
Let’s talk about something that nobody likes to talk about but EVERYBODY needs to master: losing trades. |
Yeah, you read that right—I’m here to teach you how to lose. Because guess what? Losing is a part of trading. |
It’s inevitable. |
But there’s a right way to do it, and there’s a way that will absolutely destroy your account and make you rage-quit the markets. |
So, let me tell you about what I like to call a "great losing trade." Yes, there is such a thing, and if you play this game long enough, you’ll realize it’s one of the most important skills you can develop. |
The Setup: My QQQ Put Trade |
Let’s start with the trade. Yesterday, I put on a bearish intraday position—a QQQ put. |
I paid $1.12 for it, and as the market decided it wasn’t in the mood to sell off, the trade didn’t go in my favor. |
Now, most traders at this point would panic, double-down, hold on too long, or let the trade completely expire worthless. |
Not me. I managed the position. |
I exited the trade for $0.70. Yes, I took a loss, but here’s the kicker: that $0.70 salvage value is what separates disciplined traders from the amateurs. |
Why? Let me break it down. |
A Great Losing Trade: What It Means |
A great losing trade isn’t about avoiding losses (because you can’t), it’s about controlling them.
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Here’s why this trade was a winner in my book, even though I technically lost money: |
I Lost Small, Not Big: The key to longevity in trading is minimizing losses. If I had let the trade go to zero, I would’ve lost the full $1.12 I paid. Instead, I salvaged $0.70. That’s money back in my account that I can use for the next trade.
The Right Option Matters: The reason I was able to get out with salvage value is because I chose the RIGHT option in the first place. I didn’t go for some cheap, out-of-the-money lotto ticket. I picked an option with a decent delta and enough time to expiration to hold its value. THAT is how you keep your losses manageable.
I Followed the Plan: I didn’t let emotions take over. I had a plan, I executed it, and I stuck to it. This is where so many traders fail. They let hope or fear take over, and that’s when things spiral out of control.
I Lived to Fight Another Day: The beauty of a great losing trade is that it doesn’t knock you out of the game. You lose small, you move on, and you’re ready for the next opportunity.
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Why This Matters: Losing with Dignity |
Here’s the reality—this business is hard enough. |
Don’t make it harder on yourself by blowing up your account on one bad trade. Losing is part of the game, but how you lose is what determines whether you’ll survive as a trader. |
Think about it like blackjack. |
If you’re sitting at the table and some idiot next to you is hitting on a 17 when the dealer is showing a 5, what’s your reaction? You’re losing your mind, right? Because they’re screwing up the odds for everyone at the table. |
Well, guess what? |
That’s exactly what you’re doing when you fail to manage your trades properly. You’re the idiot hitting on a 17. STOP doing that. |
Place trades with an edge, manage them with discipline, and know when to cut your losses. |
The Vegas Analogy: Trading Odds Matter |
Let me give you another Vegas analogy because, hey, it’s relatable and fun, right? Imagine you walk into a casino, throw $1,000 down on green at the roulette wheel, and it actually hits. |
You’re up huge, right? Does that mean you’re a genius with an edge? No. It means you got lucky. |
In trading, it’s not about luck. It’s about creating repeatable, high-probability setups and managing your risk so that even when you lose, you’re still in the game. |
If you take trades with poor risk/reward ratios or low probabilities, you might win once or twice, but over the long run, the odds will eat you alive. |
Takeaways from My QQQ Trade |
Here’s the bottom line: my QQQ put was a losing trade, but it was a great losing trade. I didn’t panic, I didn’t hold on too long, and I didn’t let it expire worthless. I took the small loss, moved on, and lived to trade another day. |
This is what separates the pros from the amateurs. It’s not about avoiding losses—it’s about managing them. |
So, the next time a trade goes against you, ask yourself: |
Did I pick the right option? Do I have a plan to manage this trade? Am I letting emotions take over? |
If you can answer those questions honestly and stick to your plan, you’ll find that losing isn’t so bad. In fact, it’s just part of the process. |
Last Word |
Trading is a game of probabilities, discipline, and strategy. It’s not about being right all the time—it’s about being smart. So, when you lose, lose with dignity. Salvage what you can, learn from the trade, and move on. |
And for the love of all that is holy, don’t be the guy hitting on 17 when the dealer is showing a 5. Keep your hands and feet inside the trading vehicle, know your odds, and let’s keep this thing rolling. |
Now, we talked a lot about losing here, but I also want you to know how to win. |
Earlier today I dished out my best strategies. |
Click below to find what they are. |
| Fast-Track Trading with Don Kaufman |
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To your success, |
Don Kaufman |
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