Trading Psychology
Best Loser Wins: Why Normal Thinking Never Wins the Trading Game
Hougaard argues that the standard retail risk rules, fixed targets, half profits, smaller size when winning, are what keep decent chart readers poor. His fix is behavioural: get so good at losing that a loss costs you nothing emotionally, then press hard when you are right. The diagnosis is excellent. The prescription is only safe at his account size.
The one idea
Most traders already pick direction well enough to make money and lose anyway. Hougaard's evidence is a broker study of 25,000 currency traders who placed 43 million trades over 15 months. Around 62% of those trades were winners. The traders still went broke, because the average winner was 43 pips and the average loser was 78. They were right more often than they were wrong and it did not matter. A broker CEO he interviews puts the same ratio at one pound won for every 1.66 lost.
His explanation is that the brain runs the trade backwards. When you are up money, the brain reads the open profit as something it can lose, so it feels fear and tells you to bank it. When you are down money, the brain reads the open loss as not yet real, so it feels hope and tells you to sit tight. Fearful when you should be hopeful, hopeful when you should be fearful. Every classic mistake, taking half profits, cutting size after a win, averaging down, moving a stop, is that one wiring fault wearing a different costume.
So the fix is not a better indicator. It is deliberately doing the thing that hurts. When a position moves in your favour and your brain says take profit, you add instead. When it moves against you, you take the loss immediately and stop caring. Hougaard's claim is that his technical analysis is average, that his charts have no indicators on them at all, and that the entire gap between him and a losing trader is his relationship with pain. He describes his own May 2020 as 137 trades, 66 losers, 53 winners, 18 scratches, and 1,513 points of profit. Under 50% right, comfortably paid.
What it actually teaches
The book buries its operating instructions inside about 200 pages of memoir, but they do form a real sequence.
BUILD THE BOOK OF TRUTHS
Export every trade you have made into a spreadsheet, then plot each entry and exit on the actual chart it happened on and paste every one into a single PowerPoint file. Hougaard's own audit produced ten findings, including that his average winner was smaller than his average loser, that he traded well in the mornings and gave it back in the afternoons, that he gave back the week's profit on Fridays, and that every one of his biggest losses came from fighting a trend. He calls this the single most useful thing he ever did and he still opens the file every morning. A sticky note saying 'use a stop' does nothing. A picture of the day you did not does.
WARM UP BEFORE THE BELL
Breathe in for seven seconds, out for eleven, until calm, which takes him five to fifteen minutes. Then run a loss on purpose in your head. He picks a number with personal weight, using £78,000 as his example, roughly the price of a car or a year of his son's tuition, and sits with the feeling until it is vivid. Then he imagines winning the same amount and notices that the joy does not come close to matching the earlier misery. That gap is the point. The drill is meant to flatten both sides so a real loss is not an event.
ENTER ASSUMING YOU ARE WRONG
Rule one of his four: assume the trade is wrong until the market proves otherwise. His confidence is not in the setup, it is in his willingness to bin the trade in seconds. Stop distance comes from measured behaviour, not a round number. He prints the last two sessions and counts every pullback. In his worked example one day showed retracements of 9, 6, 12, 3 and 11 points with a single 17-point outlier, and the day before showed 7 to 12 points with one 14. That tells him a normal pullback is about 10 points and a small one is 3 to 7, so a 12-point move against him means the position is genuinely wrong, not just wobbling.
ADD WHEN RIGHT, NEVER WHEN WRONG
Rules three and four, and the heart of the book. The mechanics: call the average five-minute range N (his FTSE example uses N of 10 points at the open, versus 4 overnight, which is why he will not trade the quiet hours). Stop is 2N, so 20 points. Risk 2% of a £10,000 account, so £200. Size unit is £200 divided by 20, so £10 per point. Then add another full unit every half N, every 5 points in his favour, and drag the earlier stop up by 5 each time so all the stops sit at the same price. He personally adds the same size every time. He tells the reader to make each add smaller than the last until they can stomach it.
REFUSE TO SET A TARGET
He has no profit target and says so bluntly, answering the question with 'my crystal ball is out for repairs.' His reasoning: risk is the only variable he controls, and a target is a self-imposed ceiling. Exits are chart-driven instead. If he is short and a double bottom forms, he may take it. Otherwise he trails a stop and places it at the price where he would flip and go long, so the exit and the reversal are the same decision. The two exceptions he allows are real overhead resistance and days he cannot watch the screen. The cost is explicit: he has lost count of the 100-point Dow winners that went to zero on him.
RUN TWENTY TRADES AND SCORE THE PROCESS
A drill he got from Dr David Paul. Take the next 20 signals your system gives you, all of them, no skipping, no second-guessing. The money does not matter and you will probably break even. The exercise exists to smoke out the trades you did not want to take and the ones you closed early, because those are where your unresolved fear lives. You repeat the 20 until you can fire them all off without an internal argument.
What it looks like Monday morning
You stop asking where to get out and start asking where to get in more. That is the one sentence that changed Hougaard's trading and it is the one behaviour change that costs nothing to test. Next time a position is 10 points onside and your hand moves toward the close button, add a quarter of your original size instead and move the first stop to breakeven. You are not doing it for the money yet. You are doing it to break the reflex.
The other Monday job is the audit. Pull your last three months of fills into a spreadsheet, plot them on the charts they happened on, and sort them by time of day, day of week, and whether you were with the trend or against it. Hougaard found four of his ten biggest problems in that one exercise, including that he was profitable in the morning and gave it back after lunch. Most traders have never once looked at their own trades this way, and it is free.
| Stage | Entry | Stop | Risk (points) | Risk at £10/pt |
|---|---|---|---|---|
| Plan: 2% of a £10,000 account | n/a | n/a | 20 | £200 |
| Open long (stop = 2N) | 7,500 | 7,480 | 20 | £200 |
| Add one unit at +5 (half N) | 7,505 | 7,485 | 20 | £200 |
| Move first stop up half N | 7,500 | 7,485 | 15 | £150 |
| Position total after ONE add | avg 7,502.5 | 7,485 | 35 | £350 |
The plan was 2% of the account. One add-on makes it 3.5%, and Hougaard routinely adds three or four times.
I am exceptionally good at losing. When speculating in financial markets, the best loser wins.Tom Hougaard, Best Loser Wins
Where it fails
- His own worked example breaks his own risk rule on the first add-on. Follow the FTSE arithmetic in the book. Risk 2% of £10,000, so £200, so 20 points at £10 per point. Then he adds a second full unit 5 points higher and moves the first stop up 5. Now the first position risks 15 points and the second risks 20. Total 35 points, £350, which is 3.5% of the account, not 2%. He adds more than once in practice, sometimes five or six times. Nowhere does he shrink the base size to keep total risk at the number he started with. He concedes in one sentence that this 'can quickly materialise a larger loss than perhaps you had wanted it to' and moves on. On a small account that gap is the difference between a bad day and a dead account.
- He breaks rule four in the book's own screenshot. Rule four is 'I never add when I am wrong.' Then he prints a DAX position where he shorts at 11,288, correctly adds lower at 11,285, 11,279 and 11,274.8, and then, in his words, 'the market reverses, and I add a little more at the old top.' The fills he shows for that are 11,295.2, 11,293.2, 11,292.7 and 11,312.7, all above his average, all adds into a loser. He ends up short 4,500 kroner a point, 25 points offside, and closes for a loss of about 110,000 kroner. He labels this a lesson about giving back open profit. It is actually a demonstration that the discipline he says he has trained out of himself is still there.
- No target plus repeated adds only survives on an account that can absorb a full giveback. The book shows a Dow short of 3,000 kroner per point sitting on 851,150 kroner of open profit. He then admits the trade did not deliver that: the Dow bounced and he made a fraction. That is fine when a month can produce £325,000 and a single flat trade is a rounding error. A trader with £5,000 who gives back every 100-point winner never reaches the sample size his argument depends on. Hougaard leans hard on 'the outcome of one trade is random, the outcome of 100 is predictable,' which is true and irrelevant if the sizing means you do not get 100 trades.
- The track record is self-reported and structurally unauditable. The introduction says he has not had a losing day in 39 trading days. The final chapter says he has not had a losing day since September 2021, about seven months. The evidence offered is a Telegram channel and Excel files posted on his own website, not a broker statement, not an audited P&L, not a third-party verification. He is candid about being a high-stake spread bettor and about the bad trades in the record, and none of that makes the claim checkable. Treat the numbers as illustration, not proof.
- It assumes you already have an edge and will not give you one. He states flatly that he could add nothing new to charting and that his screens carry no indicators at all. The four rules are a behavioural layer bolted on top of a system the book does not supply. He also assumes a European spread bet or CFD account with per-point staking and negative balance protection, five and ten minute charts on the DAX, Dow and FTSE, and a 5am to 9pm screen day. A US reader trading futures cannot stake £3 a point, cannot scale a single contract, and runs into pattern day trader rules and hard margin calls that never appear in the book.
- The method is about 25 pages. The other 200 are memoir and motivation. Black Wednesday, Royal Ascot, Liar's Poker, Philippe Petit on the wire, Elon Musk on fatalism, Kobe Bryant shooting hoops at dawn, the FedEx arrow, an optical illusion, divorce rates in Spain, his own drinking and recovery. Some of it lands. Most of it is padding around a short, sharp core. Read the chapters 'Fighting My Humanness' and 'Best Loser Wins' and you have the book.
- The case studies are winners, and the one loser blew up doing what Hougaard does. Charlie DiFrancesca, Greg Riba, Paul Tudor Jones, Trevor Neil's fund with its 25% hit rate and 25-to-1 payoff. All winners, mostly pit traders or funds whose capital structure has nothing in common with a retail account. The one detailed failure is Adam, a genuinely good systematic trader who went maximum short into a weekend, got gapped by the capture of Saddam Hussein, was liquidated from £750,000 down to £400,000, and never recovered. Hougaard draws a mindset lesson from it. The actual lesson is position size and overnight gap risk, which the book does not address.
- It quietly does not work for anyone trading under a drawdown rule. Prop and funded accounts, which are how a large share of retail traders now get size, typically impose a daily loss cap around 4 to 5% and a total cap around 8 to 10%. Scaling into a position five times with aligned stops will breach a daily cap on a single bad entry. Same for anyone with a defined-risk mandate or an options position that cannot be pyramided. The book's answer to 'when do you take profit' is 'I use the charts,' which is not a rule you can be held to by a risk desk.
Who it is for
Buy it if
You already have a setup that wins often enough and you still lose money, because you take profits at 20 points and losses at 60. This book is a mirror aimed exactly at that problem and it is the best writing anywhere on why a good chart reader loses. Read it for the diagnosis and the Book of Truths exercise, then size the add-ons down by a factor of four.
Skip it if
You are new, have no tested system, or are trading a funded account with a drawdown cap. There are no entries in here and the position-building method will fail you out of a prop account in one session. Skip it too if you want proof rather than assertion, because every performance claim in the book traces back to the author's own Telegram channel.
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