A losing trade is an outcome that aligns with your trading plan; it follows your rules for entry, risk management, and exit, but still results in a loss due to normal market fluctuations. Even the best strategies have losing trades; they are an unavoidable part of trading. For example, if you entered a trade with a valid setup, used a proper stop-loss, and exited when the stop was hit, the loss was within your risk parameters and acceptable.

A bad trade, however, occurs when you break your trading rules, entering without a clear setup, ignoring stop-losses, overtrading, or deviating from your risk management plan. These losses are preventable and stem from emotional decisions (fear, greed, or revenge trading) rather than market randomness. For instance, if you held a losing position hoping it would recover (against your plan) or entered a trade out of boredom, that’s a bad trade, not just a losing one.

The key difference is discipline. A losing trade is part of the process; a bad trade is a failure in execution. Reviewing trades helps identify whether losses were due to a flawed strategy (acceptable) or poor discipline (which needs correction).