A losing trade
The cost of testing a hypothesis, and how to get something out of it.
React to a loss with a review rather than an attempt to win it straight back.
React to a loss with a review rather than an attempt to win it straight back.
On a losing trade the whole amount is lost. That is the cost of testing a hypothesis — built into the model, not some anomaly.
The problem is not the loss itself but what is done next. The classic sequence: a loss → “that is unfair” → a larger amount → a shorter expiry → another loss. That is where deposits end.
- 01Record the result in the journal
- 02Check it against the scenario: did what you expected happen or not
- 03Identify the type of mistake: analysis, entry point, expiry or discipline
- 04Check the daily limit
- 05Only then look at the next situation
The third point matters most. Two thirds of a beginner's losses are not mistakes of analysis but breaches of discipline: a trade outside the plan, too large an amount, an entry with no confirmation.
If the thought “I will get it back quickly” appears after a loss, the trading day is over. That is not a recommendation but a safety rule.
Key takeaways
- A loss is the cost of testing a hypothesis, built into the model.
- The review identifies the type of mistake, not the amount lost.
- “I will get it back quickly” ends the trading day.
A practical example
A review of a losing trade in the journal looks like this: “Buy on M5, the structure was upward, but I entered mid-range rather than from the zone. Type of mistake: the entry point.”
After twenty records like that you will see that two or three types of mistake repeat. Those are the ones taking the money.
A note from Leon Mercer Academy
Keep the four types of mistake written beside the screen. Naming one takes ten seconds and is the whole difference between a loss and a lesson.
Lesson 9 of 15 in “YOUR FIRST TRADE”