Dealing With Trading Losses

By | November 6, 2014

By embracing a loss, really feeling it, I tend to have less fear about a potential loss the next time around. If I can’t get over the emotions of taking a loss in twenty-four hours, then I’m trading too large or doing something else wrong. Also, the process of rehearsing potential losses and confronting actual losses helps me adapt to increasing levels of risk over time.My approach is to confront losses even before they materialize. I rehearse the process of losing. Whenever I take a position, I like to imagine what it would be like under the worst-case scenario. In doing so, I minimize the confusion if that situation actually develops. In my view, losses are a very important part of trading. When a loss happens, I believe in embracing it

 

Clear thinking, ability to stay focused, and extreme discipline. Discipline is number one: Take a theory and stick with it. But you also have to be open-minded enough to switch tracks if you feel that your theory has been proven wrong. You have to be able to say, “My method worked for this type of market, but we are not in that type of market anymore.”

A few quick caveats:

  • There is no place for denial in successful trading.
  • Don’t blame your losses on bad luck or outside manipulators.  Accept the responsibility yourself.
  • Don’t be dependent upon trading for all your fulfillment and happiness.
  • Focus on opportunities, not on regrets.
  • Proper risk control and discipline is non-negotiable for every trade everyday.
  • Revenge trading – trying to make back a loss – carries with it far too much emotion and is always costly.
  • Poor money management skills are the number one reason that novice traders wash out.
  • Learn to recognize your impulsive state of mind and take action to stop it.

Even the best traders in the world book small losses on a regular basis.  If you manage your emotions with consistency and if you strive for a disciplined trading mindset, then you should have no problem surviving a string of bad trades and showing profits at the end of the year.

9 thoughts on “Dealing With Trading Losses

  1. Mukul

    Sir , really good article. Every day one can not expect profits. Yesterday was chopy market. For long & for short player s . You have to treat this as pelfrage .

  2. Haresh Baraiya

    Bramesh sir
    Really one of my best trading article and very true to be success in trading as you have to manage fear of loss, greed for more profit, money management, controlling of your emotion and accept your loss as part of business and processing for making your mind set as professional trader is really recipe for success as trader
    Regards
    Haresh Baraiya

  3. Adhiraj Datta

    My trading psychology is improving. Thanks to you sir.

  4. Bramesh Post author

    Good Enuf to trade 1 lot of NF and stocks in cash market.

  5. Surendra

    In one of your previous posts you mentioned that trading capital should not be more than 10% of saving. In that case my capital comes only 50k. Is it a reasonable size of a capital which I think is too less?

  6. BL.Narayanan

    Really a very nice article to read. please guide me to know the share market, suggest me how to unterstand the technicals.

    Thanks
    B.l.nararanan

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