there are 2 types of losses in trading

12 Apr 2026 · 1 min

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In this brief instructional video, the speaker explains that trading losses fall into two categories. The first, a self‑error loss, occurs when a trader deviates from their own system—examples include overtrading, revenge trading, and other self‑inflicted mistakes. These losses are fully within the trader’s control and should be corrected immediately. The second, a system loss, happens when a trader follows their system perfectly yet still incurs a loss; this reflects the probabilistic nature of trading, similar to being dealt pocket aces in poker—high odds but no guarantee of a win. The speaker stresses the importance of correctly identifying which type of loss you are experiencing before attempting any fixes.

Chapters

There are 2 types of losses in trading. One is a self-error loss. That is when you deviate from your system. Some examples of this could be following, overtrading, revenge trading, et cetera. These are basically errors where you only have yourself to blame. You wanna fix these immediately. And the second type is what I like to call a system loss. This is when you did everything right, but you ended up with a loss. This is not a problem because what you need to understand is that trading is a probabilistic game. Just like how if you get pocket aces in poker, it doesn't guarantee win, but it does guarantee that you have the highest statistical odds of winning money in that hand. So make sure you're clear on what type of losses you're dealing with trading before you start trying to fix anything, which is why I say