Loss stamina.. what is it is usually the first thing people ask me. Loss stamina is the ability to take a loss in your trading. In the business of trading, winning involves being adept with losing.
The analogy is that of a professional boxer... Floyd Mayweather maybe the best boxer on the planet with his 50 wins out of 50 fights but to get to this, he has taken a lot of punches. As he fought better and better fighters in his career he would have learnt how to take harder and harder punches.
Same with trading the financial markets... you have to build up your financial stamina in order to win - to scale your account, to move from part time to full time, to replace your job with trading.
When I started trading over 15 years ago, I remember losing £50 on my first trade.. I was sick to the stomach and couldn’t trade again for a week... this is the equivalent of being KO’d in an amateur fight.. I was down and out.
Fast forward to today, I’m very comfortable risking £20,000 on a trade as my potential reward is at least double that. Assuming we’re working on the same risk to reward ratio for my £50 trade 15 years ago, if I couldn’t increase my loss stamina from those levels I’d never be able to scale and trade profitably.
Once your loss stamina has been exhausted, you will feel stress, panic and fear.. once this happens your trading goes out the window, you will make mistakes, not execute on your trading plan and ultimately blow your account (getting KO’d)
So how to build up your loss stamina? The same way you would build up to lifting 100kg or running a marathon. Start small and increase. Start by trading small, take small losses and small wins.. if you have a trading system that works you will get use to say risking £50 to win £100. It’ll take a little time but you need to get to a point where there is no feeling when you lose £50. You may have 3 losing trades in a row and lose £150.. does it still feel ok? If not keep trading at the same size until the pot is big enough and you don’t flinch if you lose. Then you stake higher always ensuring your stake to account size ratio is the same as when you started. You gradually stake higher and higher and this stretches and grows your loss stamina. If you think you can handle a significant step up you can add a much larger amount into your trading account, but keep that stake to account balance ratio. If you’ve overstretched yourself, you lower the stake.
Building up this way is going to take time, may take years before you get to be able to stake £20,000 and not flinch. However, as with anything professional, it will take time. Floyd Mayweather started training when he was 7 years old and age 16 won his first amateur tournament.. 9 years in the making. 3 years after this he was at the 1996 Olympic Games in Atlanta and lost. The same year he turned professional and got his first world title 2 years later. From then on, he just got better and better! The other thing to note about Floyd was that he focused just on boxing, there was no other career choice for him and it still took years. Financial trading is a highly competitive professional, it attracts the best brains (because of the potential rewards).. some people say it's one of the hardest professions. If it takes 5 years, if it takes 10 years to get to a point where you can make money consistently, it's still a worthwhile endeavour. My personal journey was long, blew a lot of accounts, I was ready to quit so many times but am so glad I was persistent. Persistence will be for another blog!