Every system sucks.
Social media trading evokes the idea of a perfect winning system: zero-retracement entry and a direct hit to the target.
Guru traders avoid discussing their losing trades or losing streaks to maintain the illusion that you can consistently take profitable risks without losing.
This leads their inexperienced followers to believe that if they lose one (or more) trades, they're doing something "wrong," and to chase after a mythical trading system that never loses money.
It doesn't exist.
If you trade, you will eventually lose money.
Every edge or profitable trading system will either fade over time or be completely destroyed by shifting market conditions.
Trends end, and there are false starts. Trend followers get crushed.
Breakouts fail. Momentum traders get stuck.
Mean reversion stops. Mean reverters get crushed.
This doesn't mean the system itself is flawed.
It's just a cost of doing business.
The point of risk management is to be able to withstand those inevitable losses and continue trading.
That's why it's called risk management, not risk aversion.
If you want to avoid losing trades, there's a simple solution: don't trade.
Otherwise, you need to accept the fact that even the best trading system will eventually lead to losing trades.
This is precisely why traders are obsessed with position sizing: the goal is to maximize the edge while it exists and the market mechanisms support it, not to lose everything if the edge wanes or disappears completely.
Crucially, if your previously profitable trading system starts losing money, it could be a warning sign that the underlying mechanisms are changing.
Is a trend-following system experiencing consecutive losses? The market may be consolidating.
Is a breakout trade turning into a trap? The market may be losing momentum.
Is a mean-reversion trade out of range? Volatility expansion may be occurring.
These are key insights, but you can only truly capitalize on these advantages if you're willing to stick with your system, learn its nuances, gather data, and take the risk, rather than panicking and abandoning your position after the first losing trade.
Summary:
1. Losses are inevitable. Every trading system will experience losing trades. Losses are a cost of doing business, not evidence of a flaw in the system.
2. Risk management is not risk aversion. The goal is to size losses so that they don't bankrupt you, not to eliminate them completely.
3. Advantages fade. Market dynamics change rapidly, so once-profitable strategies may no longer be viable, and losses can be early signs of market change.
4. Maintain discipline and gather data. Stick to your system under different regimes and withstand volatility.
