"I hate to lose," is an expression that should never exit in trading. Not only because trading fundamentally about losing properly but because hate implies fear and fear is the one emotion that you must banish of you want to be able to trade for the long term. Trading like all economic activities is inherently risky. Every trade is nothing more than a probability bet and even the best odds do not guarantee a win.

One the most insidious problems that we face as traders is that human beings tend to grossly overestimate their chances of success. Tell someone that you have a system that wins 70% of the time and while intellectually they may acknowledge the fact that the system will lose occasionally, emotionally they will expect a near perfect, unbroken string of wins.

This of course is ridiculous. A rudimentary knowledge of statistics will tell you that a 70% win system can easily register five or even ten losses in a row. Emotionally however, most traders simply cannot accept that fact. Thus the statement "I hate to lose" is seen as badge of honor, when in fact it is nothing more than an expression of ignorance and stupid bravado.

Don't get me wrong. Losing is never pleasant and you never fully get used to it. But if you really want to trade for a lifetime, you must make peace with losing and most importantly you cannot let losing paralyze you from taking the next trade. I am as guilty as anyone of throwing temper tantrums like a two year old after getting stopped out. There was a point at one time where I came very close to chucking a 20 flat panel inch monitor out of the window of my high rise apartment building in New York after a particularity nasty and prolonged trade that resulted in a very painful loss.

However, instead of ranting and raving I found it to be much more productive to deconstruct the losses. One very valuable lesson from that process is that you begin to distinguish the truly bad trades from just unlucky ones. Imagine if you were a shortstop in baseball or a defender in soccer and as the ball was coming towards you it suddenly bounced off a pebble thrown onto the field by some moronic fan. The ball once hitting the pebble would veer off in a completely different direction and get past you. Could you really be mad in that situation? No, rationally you know that you cannot defend again the "stray pebble" play because it is completely random in nature. On the other hand, if the ball was coming right at you and you let it slip by because your mind wandered on that cute girl in the stands, you would have every right to be furious with yourself.

In FX, the "stray pebble" trade happens all the time. You can be properly positioned, anticipating a certain economic release when some government official makes an off-hand remark that changes the whole tenor of the market and even if you are right on data, the trade goes bust as sentiment ignores the news focusing on the rhetoric instead. It is very important to understand that in that case you did nothing wrong. You must simply accept the loss and move on. Conversely if you got stopped out because your selection was poor or worse you had no legitimate reason to enter the trade than you must recognize the mistake and correct it the next time. In either case, but performing cool, level headed analysis you hopefully improve and most importantly you learn to trade without fear.

Boris Schlossberg serves as director of currency research at GFT, and runs bktraderfx.com.