Losing in Trading? Stick to a Trading Plan & Study Your Mistakes

Traders lose money in stock market for many reasons. They may not have the right methodology to trade with. They may not have clear understanding of how the market works, key indicators, key numbers, and ideal times to trade. Risking too much per trade and not being mentally prepared for the ball game.


Whether it’s the result of unexpected market events or simply a poor trade idea, losing money invariably leaves one with a miserable feeling. Worst still if it is happening over and over again- a trader also feels loss of confidence and right attitude.

In my tenure as a trading coach and guide I have come across and observed many traders who consider putting in real money even when they are losing with their paper trades. I don’t think anything can be worst than that. But then there is little you can do as a coach when someone has lost the sense of direction.

Some of the most common consequences of losing in  could be that the trader gets into frenzy and makes haphazard trades without a pre-plan and as a result losing even more, or the second outcome could be that he may be so scared of incurring any more losses that he starts to avoid trading.

Real traders are those who don’t lose mind and fret over losing trades for too long and take the message in the right frame of mind. They normally resort to studying the mistakes they made along with the prevailing market conditions to the time the losses occurred.

The traders try and take a micro view of the factors that resulted in price movements. These in-depth analyses done inside out will help these people to develop better and more realistic trade strategy for the next time similar situation crops up. A trader should make it his habit to review his trades whether they are winning or losing deals. This ongoing process of studying his trades and mistakes will help him to improve his trading strategy and system. This will help him gain perspective that works. He will be able to bring down the number of losing trades over a period of time as he will be learning new market patterns and adapting to them.

The process of learning can be broken up into three phases:

  • Analyzing the trade itself
  • Reviewing
  • Innovation.


Let us first look at the act of analyzing the trade. Analyzing your trade irrespective of the final outcome, whether the trade resulted in loss or profit is the first step towards building a career as a successful and professional  trader.

Next comes reviewing or feedback. A trader should remember at all times that he is not in a position to watch himself as he trades. In such a situation it becomes important that he takes a third-person’s point of view, keep a note of every aspect of his trade from his thinking pattern, to market movements, and based on the facts he can analyze if what he did was right or wrong.

After you have kept a record of what and how you’ve traded, the next step for the trader is to incorporate changes, bring amendments, and rectify the mistakes wherever required.  If during the second phase of reviewing some problem were found they have to be taken care of at this stage. It could vary and cover any aspect right from changing trading instruments  to market timings to changing the trading system or spending some more time on paper trade to develop discipline.  By taking this exercise up a trader can compete and develop his skills much, much faster.

The impact of the recording, reviewing and making adjustments and re-aligning the procedure turns the trading deal into an experience you can learn something from which indirectly speeds up the learning process. And come to think of it, it is not difficult at all. It’s simply a matter of forming a habit and sticking to it.

A wise trader will also try and steer clear of the psychological pitfalls.  He will make sure that greed to make a quick buck, or extreme fear of losing money in trade will not get better of his sensibilities and market realities.  A  trader will make sure he does not overtrade and his money management skills are in place.

Being in a hurry or indiscipline is another major pitfall for a trader. When a trader is on a losing spree one after the other he tends to throw the trading plan out of the window and soon thus abandons some perfectly good trading methods. A trader should understand that every trading method has its time and situation frame within which it succeeds. At other times it could perform below average. A sensible trader will realize that no matter how good a trading base be, it cannot perform, at peak efficiency under all types of market conditions. If you want to become a successful trader in the long run you will have to inculcate the discipline to stick it out through the hard times without losing the focus.

To become a successful trader, you have to stay composed, be rational and emotionally detached. These traits are generally not found on new traders. Experienced traders are far cooler and composed and have learnt over time that you’ll win some and you’ll lose some. An experienced trader trades with enough money to allow for a buffer when losing deals come. You should be ready to handle the losses, because they are inevitable and are bound to be there. A trader learns to control his emotions after wins. Learn to take winning in your stride. Automatically you will learn to handle losing deals too.

So that is that. Lose money. Do not lose the lesson. Do not let learning stop.


  1. kiran said:

    yes sir, self-analysis,trade-analysis,trade set-up review… fundamental points ,thanks for this motivation, bless u

    April 29, 2015
  2. nagesh said:

    Fantastic article

    April 29, 2015

Leave a Reply