How To Manage Losing Trades

Benzinga

Christian Fromhertz, CEO and Founder of The Tribeca Trade Group, joined Benzinga's Premarket Prep team and discuss with fellow trader, Dennis Dick CFA, about how to manage losing trades if you ever find yourself in one.

Transcript

00:00I do like the conversation of the losers. What's your last loser? I really think,

00:07and I threw this in the chat earlier, your year can really be defined based on how you manage

00:13the losers. And yes, nobody talks about them on Twitter and so forth. But if you do not have a

00:18good system or a good trading plan, it's the old saying is that you've got to have bigger winners

00:28than losers and you do have to manage the losers. You can't have large losers in this game. You've

00:34got to keep the losers small and you're going to have them no matter what. And it's okay to be,

00:42one of the things too, I'm just throwing a couple of things out there because the conversation of

00:45losers is so important. But you could be wrong all the time. And Dennis talks about this in

00:51his trading and it's a great education to investors. You could be wrong quite frequently.

00:57You just don't want to stay wrong and you don't want to be stubborn. Stubbornness is probably one

01:02of the worst traits that you can have as a trader. So I love the conversation and I love

01:07the transparency that Dennis brings, even though no one on Twitter has any losers.

01:13Well, Christian, do you have any losing traits? Can you tell us about one notable loser or fun

01:18loser? Sometimes they're fun and sometimes you'll learn. Oh no, they're never fun. They're never fun.

01:24Yeah. I mean, I had a loser last week and they do end up being distractions too, because it kind

01:31of messes up your day. I mean, and I like how you're good traders and another really good

01:36trait of good traders is they just get over them really quickly. I was in Chipotle last week when

01:42they announced that the CEO is leaving and there's nothing that you could really do about

01:47an announcement like that. And that's part of the business is that just sometimes,

01:52I'm mostly a swing trader. So from time to time, this sometimes scars traders from they have one

02:00of these and like, oh, I'm never holding a position overnight, but it is what it is. It's

02:05part of the business where you're going to be lucky sometimes, and you're also going to be

02:10unlucky sometimes. And the announcement that the CEO is leaving was such a big reaction in Chipotle

02:17and in Starbucks. I don't think I've ever seen a reaction like that where a CEO leaves one company

02:23and goes to the other. And it shows you what respect that they have for this guy. But yeah,

02:29I mean, I was caught in that name and it ended up being a loser for me. I did add a little bit

02:36to it just for the day. I mean, usually when I'm in a trade, I've got reasons to be in that trade.

02:41And I was looking for a recovery in Chipotle because it had dipped with everything else.

02:47And I was just looking for kind of a reversion trade back a bit. And once that news came out,

02:53I was like, OK, well, that swing trade is gone. I did try to salvage a little bit because I thought

02:58it was an overreaction. And I managed to kind of salvage the not the whole trade, but the

03:06the ad that I did because I added a little bit too early. And so I did get off. I did get out

03:11of the ad for like a dollar gain. But overall, the trade was a loss. And, you know, just really

03:17the last thing I'll say is that it also like when you've got a situation like that, it's often

03:22it's just better to kind of get rid of it because then you're distracted. And that day was a big

03:28rally day for the market. And I was a portion of my day was watching Chipotle. And I was like,

03:33geez, I missed everything else.

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