If you’re new to trading, you will experience trading losses. It’s just part of the game, but how you handle losses is entirely up to you. My number one piece of advice if trade didn’t work: Don’t dwell on it.
I’ve seen experienced traders literally lose their minds over trades that went bad. I have had some really “good” losses, some horrendous losses, and some so big they are unforgettable. But instead of feeling sorry for myself, I learn valuable lessons from those trades and become better down the road.
Is it really that easy? Well, not quite – but a positive attitude and a willingness to change are good first steps.
What typically happens when a trade didn’t work
When a trade goes against you, it becomes a frustrating experience. You can lose control of your emotions and allow destructive ones to take over – greed, revenge, stubbornness, anger and denial. Once these take over, you spin out of control and often chase after a trade without any rational thought behind it. That trade didn’t work either, so you double down and become more frustrated as the cycle turns. Eventually you have to stop because you have lost too much money – or all of it.
Instead, don’t dwell on it
If you’re in a downward spiral, you have to do something really hard: accept the losses, move on, and don’t dwell on it.
I’ve had such horrible trades that I’ve actually paid the broker to take them out of my account! As crazy as that may sound, it gave me the psychological advantage to move onto the next trade. There is nothing better than a fresh start.
Many traders are stubborn – which is both good and bad. Good, because trading for income is tough – you need to be able to stick it out. Bad, because admitting you are wrong is not fun. It’s tough for me as well, but I look at it this way: It’s just one trade that did not work, so I’m moving on.
The less time I dwell on a losing trade, the more time I can spend searching for the next winner. I don’t get angry often, certainly far less than I used to as a novice trader.
Losses are humbling. They bring you back down to Earth, and they also provide valuable lessons. Use them to become better.
