To produce profits, consistent profits, and then big profits, you need an edge, a strategy that gets molded and adjusted into a trading plan that matches your unique goals and resources. When a trader reaches this stage, trading losses are a business expense.
Today we will discuss few steps a traders can take on dealing with losses and not to whine over them.
Develop positive beliefs around losses
Accept that losses are a part of trading, and that setbacks and challenges are a part of achieving any challenging goal. Embrace the challenge. Tiger Woods famously said, “I smile at obstacles”.
There is always an excuse for a losing trade. Some are actually good excuses, but as traders, we ultimately must accept all the risks. Until that is accepted—that we are responsible for whatever happens with our orders (no one is forcing us to place our orders)—history will likely repeat and the same thing will happen again.
Accept responsibility and figure out what could have been done differently. This will help reduce the chance of it occurring again.
Looks at a Bigger Picture.
Trading is a WAR Losing few battles do not let you lose a war !!
Imagine the number of trades that you make in a year and put a single loss into the context of the total number of trades. Imagine someone making 5 trades a day, 25 a week, 100 per month, and over 1000 a year;
each trade, a losing trade, as a percentage of those trades is just 0.001%!
Back to Practice and Building Confidence
After a big loss, the confidence can be low. That means the mind may not be right for trading. Take a step back, and trade in a demo account for a few days. If you have been losing, likely you will save yourself money. There is also less pressure in a demo account (no real money) so it is easier to just focus on trading, and not worry about the financial aspect of it.
Learning from a Loss
Ask yourself below questions
- what have I learnt from the Loss ?
- How will I use the Learning in future trade
- See the implementation of the learning from the loss as an investment in your future trading career!
Try to Find Mentor
Mentor Coach is important as they will give you another perspective of your trade which you might have missed. All National Level team in any sports will have coach as they can give the extra edge require to analyze the problem and how can it be solved in a different manner which will lead to more profits.
Don’t let a losing trade become I am a loser
Refuse to let your losses define you as a person. Separate out the behavior from you, the person.
Separate a bad trade from a losing trade. What is the difference?
A losing trade is one in which you traded your strategy, stuck to the rules and were disciplined, and yet had a negative P&L as the outcome.
A bad trade is a trade that was a non-strategy trade, and is a bad trade regardless of whether you made or lost money!