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Taking a loss is the single most difficult aspect of trading to conquer, but it is also the most important. Without developing this ability you will find yourself having setbacks after successful trades. The reason? Most people have the wrong definition of what it means to make a successful trade.

A common misconception is that if you don’t make money on a trade it wasn’t successful, and if you do make money then it was. This couldn’t be further from the truth. We’ve made plenty of successful trades that lost us money and we’ve also made money on a trade that wasn’t successful. Confused? We thought so, so let us explain.

Before you ever enter a trade you should be coming up with trade parameters. These parameters can be based on technical analysis, or fundamental analysis. For example, if a stock has been trading between $14.80 – $15.00 for a few days you can say to yourself, “I am going to buy on a breakout of $15 with a stop loss if the stock then falls back below $14.80. My target is going to be $15.50.” This of course would be a trade based on technical analysis. (For further reading on technical analysis vs fundamental analysis, click here).

Now say the stock does break above $15 so you enter the trade based on the parameters you had laid out for yourself. But then the stock ends up only going to $15.10 before it reverses and trades below $14.80 causing you to get stopped out and take a loss. To us this doesn’t mean your trade wasn’t successful, it just means it didn’t go in your favor.

Take the opposite approach. Say the stock doesn’t break $15 but you decide to enter the trade anyway, before the breakout. Really what you’re doing here is guessing and hoping for a breakout above $15. Then, like magic, the stock breaks $15 and surges all the way to $15.50 causing you to profit. Sure you made money but we would not consider this a successful trade because you did not follow your parameters.

While the following will sound very counter-intuitive it is the key to consistent profits over the long term: Trading is not about making money, it’s about making successful trades. If you can consistently make successful trades based on predetermined trade parameters and execution based on that preparation then the “making money” part will take care of itself. Trust us.

Think of trading like studying for a test. Most people study simply so they can pass a “test.” Other people study to retain knowledge because they are interested in learning, and passing a test is just a byproduct of the knowledge they have retained. Making money is a a byproduct of making successful trades, not the other way around.

This brings us to our point regarding MILV and AMWI. Both stocks made very nice runs before collapsing to literally give up all of their gains. Anyone who entered either stock without trade parameters is likely still stuck, hoping for a bounce so they can salvage some of their losses. And anyone who made money off MILV or AMWI without a plan for doing so is only going to learn their lesson at a later date.

Digging deeper into awesomepennystock.com’s (APS) previous pick’s performance after APS get done pumping them though reveals that this is nothing more than wishful thinking. Let’s take a look at three recent APS picks and see where they are now that the site is not promoting them anymore.

POTG ran from $0.20 to over $1.00 during their promotion but has since been downtrending for the last few months. Anyone who got stuck in POTG in September and didn’t sell around $0.20 or even $0.10 when they had the chance can now happily let go of their shares for $0.06. HDSI was profiled at $0.15 and then hit a high of $0.40 but now trades for about a nickel. Anyone who thought they were holding the bag around $0.30 is now definitely holding the bag at $0.05 and has to sell at an even bigger loss than before. Lastly, NSAV ran from $0.20 to $0.85 during their coverage. Today it trades for $0.03, enough said.

You don’t need to be a rocket science to realize that if you hold onto APS picks after they drop their coverage, or even while their continuing to tell everyone to buy, you’re going to lose money. MILV and AMWI are proving to be the latest examples.

So if you’re still holding MILV and AMWI and you’re thinking to yourself – “I can’t sell here because I’d be taking such a big loss.” – just remember that it probably won’t be as big of a loss as you’re going to take if you wait another few weeks or months. MILV and AMWI are probably 50-75% higher now than they will be in the future. Besides, you can’t move on until you first accept, and taking your losses is the first step in moving on and learning from your mistakes. Chances are the mistake you made in the fist place stemmed from not having a plan for executing your trade. At stockhaven.com we don’t do that.

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