Trading will always bring fortune and misfortune to those in the market. Just like in life, the inevitable ups and downs are a natural part of this particular human activity. But there are ways to make the most of losing and turning it around to your advantage.
Here are five tips on what to do when you lose one or a series of trades.
- Don’t chase losses
Don’t increase your next trade to compensate for money that’s already gone. Your emotions are probably already heightened and you’ll probably be looking to make it right after what you perceive to be a mistake.
Each trade is a separate thing, it has its own motives and conditions and its own target. Just like the roll of a dice – it has nothing to do with the previous one.
- Own your losses
Don’t blame something external like the market, or someone who you think misled you with trading advice or tips.
Analyze your steps leading to making the trade – see what might have gone wrong and take it into account for the next one. If you only blame everyone except yourself you can’t learn.
- Accept that trading takes time to master but doesn’t always give equivalent rewards
If you work for a month you usually get a fixed salary. If you trade for a month you might not get anything or even lose money.
Keep this in mind and balance it with your work and/or personal life. It will make your trading decisions calmer and more focused.
- Train your reaction to losing
Don’t be too hard on yourself, it doesn’t matter if you’ve just made a stupid mistake. Take it in your stride and learn from it.
When you reach this mindset you’ll be able to assess risk better and you won’t endanger your account with mistakes that you’ve made more than once.
- Know when the war is lost
There are just things we’re not good at and wasting time on them is pointless. If there is a market or a particular instrument that you keep losing on – just stop trading it and focus on those that you’re better at understanding.
Look for the path of least resistance, just like a river.
This part of preparing yourself is vital for long-term success. Just like the three most important money management tips for traders.