Suffering from trading losses? You’re in good company. Over my trading career, I have had my share of big wins and spectacular losses. The victories are often very sweet, but it is the losses that I remember – even those that happened 20 years ago. Losing money is embarrassing and demoralizing.
However, losing can also make us better traders. To snap out of a losing streak, we are forced to change our behavior and reset our mindset. If you refuse to learn from your mistakes, you will just open yourself up to even more unnecessary losses.
So let’s talk about how to change your behavior to avoid losses in the stock market.
How to avoid losses in the market? Set your ego aside
One thing that gets in the way of our decision-making is our ego. Oh, we like to think we have our ego in check, but when our money is on the line and the outcome is uncertain, we tend to hold on tight, refusing to admit we are wrong.
It quickly turns into a downward spiral. If we are in a losing trade, the pressure starts to build – we need to recover those losses. There’s no time to consider what we did wrong. The result becomes more important than the process, and we end up repeating the same mistakes.
Change your behavior and mindset
When I am faced with a loss or have been on a losing streak, I tend to stop trading for a while – even up to a couple of weeks.
I use the time to review my strategy, look for mistakes, and refine my approach so that I can avoid future losses. I’ll also do some reading about trading to learn from others and brush up on trading strategies
Before I get back into the game, I’ll usually do some paper trading to make sure my head is in the right space. If you want to avoid losses in the stock market, you need to make sure you have a strong trading mentality.
I want to feel confident but not too bold. Before I know it, I have a renewed outlook and am finding the trades that will make money.
Whether you’re suffering from a losing streak, or just want to learn how to avoid future losses in the market, you may benefit from my free mini-course: Be a Better Trader in 30 Days.
