there are 2 types of losses in trading

12 Apr 2026 · 1 min

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In this short monologue, The Art of Crypto explains that trading losses fall into two distinct categories. The first, a self‑error loss, occurs when a trader deviates from their own system – examples include FOMO, over‑trading, revenge trading, and any behavior for which the trader is solely responsible. These losses should be corrected immediately. The second, a system loss, happens when a trader follows their system perfectly yet still incurs a loss; this is framed as a natural outcome of trading being a probabilistic game, akin to being dealt pocket aces in poker – high odds do not guarantee a win. The speaker stresses that before attempting any fixes, traders must first identify which type of loss they are experiencing, because the remedy differs dramatically between self‑error and system losses.

Chapters

There are two 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 FOMOing, overtrading, revenge trading, etc. These are basically areas where you only have yourself to blame. You want to 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 loss processes you're dealing with trading before you start trying to fix anything, which is why I say