 Welcome back to the Trade Hacker Mindset. In this episode, I want to talk to you about how to handle a big loss. Trading the markets can be difficult to master and seemingly just out of reach. Professional traders have a secret. Trading requires total mental and emotional control. It requires the Trade Hacker Mindset. All right, so let's jump into this discussion of how to handle a big loss. I was thinking about this for a couple of reasons. Number one, we are in the midst of a pretty massive correction in stocks, okay? And so, for people who have been used to buying the dip and they tried to buy the dip this time, they are not doing so hot, okay? So that's one thing, the market has seen a massive downturn and I've seen posts and emails coming from our community about kind of, what do I do now, I'm in this situation, do I hold, do I cut my losses, what do I do? And a good friend of mine who trades, he had a situation recently within this downturn recently where he had a big position in Netflix. Started off as selling puts. He was kind of buying the dip on a short-term basis. Every time Netflix dipped, he was buying, or excuse me, selling puts and looking for that bounce to collect that premium. And if the stock would go down, he would just get assigned shares and then he would start selling calls against it. Kind of known as the, you may have heard the term the wheel strategy where you just sell puts, if you get assigned stock, then you sell calls against it like a covered call and you just kind of rinse and repeat. Well, that works fine if the stock stays in a range, trades sideways, trades down a bit for a while, trades up primarily in the whole buy the dip thing. But when you're in a situation where we've seen what stocks have done lately and primarily, let's use Netflix as the example, a couple earnings announcements ago, they came out and announced earnings and I think their stock dropped 20 plus percent. Then it kind of chopped around until the next earnings and then it dropped another 30%, okay? Trying to play the buy the dip or the wheel in that type of a situation, it's very, very painful. And so I had multiple conversations with this individual about what they should do with that position. And here's what I said. I said, are you better off because you've taken that loss, right? You are in a significant loss position. He was holding a pretty significant position in Netflix stock because he had been assigned from the short puts. So the question is, do I hold the stock and just wait for it to rebound, right? Stocks usually come back, that kind of mentality. Or will I get back those losses that I've suffered by cutting my loss in that one stock, cleaning the slate and getting back into trading other vehicles and other strategies in this new environment that we're in, which way will I get back to even faster? Which way will I recoup my losses quicker? And my thought was, you've got to cut the loss. You've got to clean your slate. And not only from a logical mathematical reason of potentially getting that loss back because I think we're seeing a situation where I'm not sure Netflix will ever get back. I mean, there's so much streaming competition. We've been hearing this for a while now, but now we're actually seeing the price of the stock react not only because of the whole inflation issues, everything else we have geopolitically going on, but also just the nature of the industry Netflix is in particularly, okay? So my advice was cut your loss, utilize strategies that are, I mean, we're in a bear market, right? We are, the Fed is no longer pumping money into the system. The Fed is drawing money out of the system. We are in a different environment that we are in at the end of 2021. And so you have to adapt to that particular situation, okay? So from a mathematical logical standpoint, my thought, my assumption, and again, this is, we don't know what's gonna happen in advance, but my thought, my process, my mindset was cut the loss to because I think there are better strategies, other vehicles that you could use to get that loss back quicker, okay? That's number one. But number two, and probably the biggest thing is the mental part of this, okay? If you hold onto that Netflix position, what does that do to your mentality around trading? Well, A, you're tying up capital in a losing position. You're tying up capital in something that is tied to a loss, okay? So every time you open your platform and you see that Netflix position, you're gonna be thinking about that loss. It's gonna be clouding your mind. It's gonna be clouding your judgment. So other trades that you make, you're going to make different decisions with your other trades because you're still holding onto that Netflix position, okay? And so not only are you tying up capital that could be used for other positions, but you're tying up your mind from making clear decisions about your other trades, okay? So from that standpoint, I think it's very, very important. What I've found over the years, over trading over the last 20 years, is that as soon as I, if I incur a loss that's larger than I anticipated or larger than my, you know, what I ever would have expected to take getting into a trade, if I find myself in that position, almost always the best idea is to cut that, cut it, just get rid of it, close it, be done with it, clear it off your slate, clear it out of your platform so you don't see it anymore. And what happens is you hate to take the loss and you know, sometimes you'll see the, you know, it rebound and go back in the direction that you needed it to afterwards. And so you have this kind of little bit of regret. Oh man, I, yeah, I wish I, I kind of wish I would have held it now, that kind of thing. But more importantly than that, almost invariably, almost every single time that I've cut that loss, I've made back the money quicker than that vehicle would have made it for me. And it's like, as soon as I hit the click send button to close that trade, it's like a, you can feel the weight of that position off your shoulders. You can almost feel the weight of that position leave your mind, like it's this dark cloud hanging in your head and it literally, you can see it move out of your head and out of your mind. And all of a sudden you have a lot more clarity to take different positions and start to whittle that loss away and get back to a point where you are trading with a clear mind and a clear slate. Don't discount the amount of power that that has on your overall trading ability. Because remember, the majority of the trading that as long as you have a good strategy in place, as long as you have good mechanics, as long as you follow your rules, as long as you have that edge in a strategy, the number one thing that causes different performance, profits or losses in your trading is your mindset. It's how you deal with fear and greed. Now, that doesn't mean that you cut that Netflix position. You don't cut that big loss and go right back into doing the same thing on something else. That's what we call revenge trading. We've talked about that in length in different podcast episodes. But by cleaning the slate, you also have to clear your mind and get back to the basics, get back to your mechanics, get back to sticking with the rules. And the only way that you can do that typically is to clean the slate. Because if you're still in that losing position, you're still holding onto that, you're going to be doing things that are not within your realm. Because you're already in a bad position. So what would say that you don't make another bad decision to try to make up for that bad decision? Because you're seeing it every day, right? Every time you open your platform, you see that position and it's in the back of your mind. And you have to make a decision based on that trade that you made instead of just having a clean slate and making the best decision possible. The other thing is, what is a situation like that due to your sleep? Like the conversation I had with my friend who had this position, he was losing sleep over this. I mean, it was a pretty big position. It was a pretty big loss. So not only was it affecting his trading going forward, but it was affecting his relationship with his family. He was irritable. He was thinking about it when he went to sleep. It was the first thing that he thought of when he woke up every day. And so not only is it affecting his trading, but it's affecting every other aspect of his life. It was affecting his performance at his main job. So think about all of those negative things that that can affect and then think about cutting the loss, getting it off your platform, getting rid of it, being done with it and think about how that is now going to affect all these other aspects of your life, including your trading. It's a huge deal. I cannot emphasize enough how big of a deal that is on your mentality around the rest of your trading and the rest of your life. So that's all I've got. I wanted to share that. I thought it was something that could help a lot of you. Hit me up in the community if you have any questions about that or if you have any comments, if you've had a situation like that and if you've cut the loss and how that helped you. Go to community.navigationtrading.com. We have hundreds of traders interacting on a daily basis, not only about the mindset stuff, but helping each other become better traders. And we look forward to seeing you on the inside and we'll see you in the next episode.