Currently featured in Toyo Keizai Online column: Not everything will win

Good morning, this is Matsushita.

Every Sunday, we deliver a column on themes related to investing.

Today's theme is,

“Not everything can be won.”

Will you win in all the trades you undertake from now on?

Of course not, right?

Even though you understand this fact with your head,

in actual trading it tends to blow away,

and you try to win in every single trade.

Understand that irrationality, and

in order to ultimately make a profit,

to understand that you can “lose on purpose,”

read this column.

【Column】 Makoto Matsushita's Investment Inquiry

206th installment: “Not everything can be won.”

When viewing investments as a repetition of individual trades, profits depend on

the outcomes of countless trades; something that’s easy to see with a moment’s thought. It’s

impossible to profit from all of these countless trades. Investment is an act of

preparing from the start for losses or drawdowns that will occur someday.

However, even if you understand this calmly, in practical trading

you can’t proceed that way. If the position in front of you falls into a loss,

you wish to recover to profitability somehow. This line of thinking is irrational,

not allowing any loss, unable to accept even a single defeat.

Profitable investors have long since shed this irrational mindset,

and they cut losses quickly, while likewise taking profits quickly.

Many investors experience this, but the majority of profits are formed by a few large profits trades. From this,

as can be seen, in investing you don’t need to win in every trade,

and you do not actually win in every trade. Because you assume you will lose someday,

it is better to execute a stop loss without hesitation.

Most losing patterns for individual investors come from losses that could not be cut and grow far beyond imagination, damaging capital.

In investing, you do not win in every trade. Win solidly in the trades that can be won,

keep that in mind, win decisively when you can,

and when you lose, cut the loss with resolve. Repeating this will ultimately lead to profit.