All traders at some point have experienced a losing trade. Whether is was a small loss or a massive loss, most traders go through a low period following a significant trading loss. Many traders get discouraged and give up trading at this point, however there are many great strategies to help you recover from trading loss.
Take a Step Back
One of the best strategies after experiencing a trading loss is to step away from the situation and objectively look at the reasons for the loss. Was your strategy off? Were you too aggressive? Not aggressive enough?
Most traders keep a journal of their trading history and after a loss, it is a good time to review your journal to see where the losses began. Once you can pinpoint the start of the downward turn, you can begin to investigate your loss and the reason’s behind it.
Acknowledge your Trading Psychology
Everyone has a psychological response to trading, whether they are up or down, and it is important to pay attention to how you react to these ups and downs. Some traders experience a rush when they have a successful trade and this rush can cause some to take larger risks that may or not be part of their original strategy. Just like when a trader experiences a loss they can often become extremely conservative, causing a serious hinderance to the strategy.
Pay attention to your psychological state during your loss. If after reflecting on your loss you find that your psychology was out of whack, learn from this. Get your psychology under control and learn to regulate your emotions while trading.
The Comeback is what Matters
The worst thing a trader can do after a loss is stop trading. If you feel your confidence wavering, start with small low risk trades. Once you get your confidence back you can start revamping your strategy to manage your loss and look for ways to recover your loss. The key is to keep your composure during this process and manage your emotions so that you are making rational decisions.
Once you have some small successes your confidence will build, and you will be able to utilize your new strategy to the fullest.
Losses happen to all traders but the most important thing to remember is that without loss you will never learn to improve. Do not look at the loss as a failure but as an opportunity to learn from the mistake and move forward. Take the time to analyze the losing strategy and improve your game plan, improve your trading psychology, and do not let your loss shake your confidence.
Professional traders all over the world have experienced losses, but the they have learned from them and improved and perfected their strategy to make sure they don’t make the same mistakes twice.