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Trend Following: How Great Traders Make Millions in Up or Down Markets

Nov 18, 2005

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Trend Following: How Great Traders Make Millions in Up or Down Markets, New Expanded Edition

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Handling Losses

You are going to have ups and downs in your trading account. Losses are a part of the trading game. You're going to have losses with Trend Following:

"You can't make money if you are not willing to lose. It's like breathing in, but not being willing to breathe out."—Ed Seykota³⁶

If you don't have losses, you are not taking risks. If you don't risk, you won't win big. Losses aren't the problem. It's how you deal with them. Ignore losses with no plan and they will come back to haunt you. Trend Following works to handle loss with stops. This sensible approach allows you to continue to trade:

"Theoretically, really big losses rarely befall a trend follower since he decides to eliminate or reverse his position as soon as the market goes against him. A lot of little losses are inevitable . . . The rationale for hanging in is that any price move could be the beginning of a trend, and the occasional big breakout justifies a string of small losses."³⁷

I began to realize that the big money must necessarily be in the big swing.

Jesse Livermore

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