No one can be secure from losses and even the most experienced professional traders sometimes lose deals and money. Even worse, it stirs your emotions and can take you to a chain of mistakes. The assets can melt in front of your eyes. That’s why the way you deal with a loss is significant.
A few essential lessons you should learn
There is no way a trader can prevent it. Losing streak is a very unpleasant and disappointing experience no matter how you look at it. Nevertheless, there are a few ways to deal with it adequately. Let’s list them up and see how to bounce back from the lost deal faster.
- Understand the nature of losses.
- Your trading edge needs time to play out.
- Taking a break sometimes may be the smartest way out.
- Emotions won’t help you get the lost sum back.
- A normal loss is a statistical part of your strategy. When you look at the list of closed deals, you see that some of them failed. No matter how perfect your trading plan is, you’ll still have a certain percentage of the flops. However, in the total result, you made a killing.
- When you lose money because you made a deal based on your emotions, you call it an emotional loss. Overtrading belongs to this category as it’s triggered by greed, revenge, or other emotions. When you risk with more than you can afford to lose in a blink of an eye, you also give in to your emotions.
Emotional losses are a real hazard as they can make you lose more than you expect. The best way to avoid this possibility is to control yourself. As soon as you tune in your winning mindset, your emotions will be in check. Consequently, you won’t risk too much and will be able to stick to your strategy.
The second lesson is more philosophical. In order to cope with a loss easier, you’d better look at it in the long run. Even a chain of unfortunate deals can seem insignificant in the long run. If you aim to be like a hedge fund broker, look at the numbers and double-check the turnout is positive. The rest is only details that you see as normal losses. When you’ve got a good plan and you stay on it, there will be nothing to worry about.
When you notice you’ve got tons of emotional losses, it’s high time to take a break and clear your head. Your trading account leads you to the new mistakes and makes the case still worse. In this case, the best panacea is to regroup and treat yourself to something nice. You can go out of town for a weekend or read something (as long as it’s not about trading). Clear your head from the job completely. Once you reach this point, you can look objectively at your past deals and see what you should do next. You’ll be able to track the emotional deals and think of ways to avoid them in the future.
- Greed,
- Euphoria,
- Hope,
- Fear,
- Doubt,
- Regret,
- Anger,
- Frustration, etc.
Although some of them might sound like positive ones, there is no place for them in this industry. It’s a distraction that can lead you to mistakes, losses, etc. When you notice you act based on your emotions, you should either lock them up or stop trading for a while.
Finally, you can deal with the losses easier if you stop treating them as they are. think of them as the expenses you pay for a valuable lesson. They teach you the ropes of trading, in their own way. If you don’t exceed the risk capital, you’ll be able to gain a lot from such lessons.