Among some of the biggest hurdles that a trader must encounter in their trading journey is overcoming the losses, both mentally and emotionally. This is something that can’t be trained, even if every step of trading is done exactly as it needs to be.
Losses do not necessarily have to be major. Even though the 1%-2% can bring down the account, gradually but surely.
However, the losses bring about all the interrelated, complex problems. emotional conflict, rage, greed, lack of confidence or vice versa, and demotivation. This ultimately results in revenge trading, pauses in trading, or stopping trading altogether. This creates blatant trauma for the traders.
Then What is the Solution to Overcome the “Losing Trades” Trauma?
Five powerful questions can help traders keep things in perspective and make better decisions in future trades without regretting the previous loss. These are pragmatic questions every trader should ask themselves after every losing trade, like looking in the mirror.
1. Do You Know What You Are Doing?
Before trading in real life, you must backtest it on the money set (or market) that you will be trading for a long time. Like the Forex Tester, there are so many effective tools to test your trading strategies on your behalf. Every system will have a losing streak, yet keeping your head clear during the touch is more crucial than the money. So if you remain on a losing streak, and even if it is simply one loss that is troubling you, go back to your backtesting outcomes and remind yourself that it is all a part of exactly how the system trades. Having the ability to answer “YES” to this question will provide you with the conviction to move forward.
2. Can You Bring Back the Lost Money?
Regardless of how much money you shed, there is no chance to reverse what took place. What is done is done and you need to go on. If you trade badly, then enjoy the fact that now is the absolute best time to identify what failed and try to remedy it so it does not occur once more. If you traded well and still lost money, then don’t beat yourself up over the 10,000 points that you could have made. That does not do you any good.
Take the loss and go on.
3. Are You Revenge Trading?
Every person has a revenge profession periodically. It is humanity. However, putting way too many retribution professions together at once can burn out your account quite promptly. Retribution trading is double trouble. When you get into revenge mode, you start throwing things out the window. Those policies exist for one purpose: to make you money!
Then, after the vengeance trade, you defeat yourself for trading improperly, which can make you think that you are a poor investor. This results in a second assumption on your part as well as on the part of your systems.
If you lost your last trade, asking if the next trade is most likely to be a revenge trade can keep you out of trouble as well as mental torture.
4. Are You Taking Excessive Risks?
You could be trading well, but simply taking a bit more risk per trade than you are comfortable with. As an example, you could see a configuration that you know inside out and also risk 3% of your overall account on that particular profession. From your testing, you know that the arrangement has a 65% chance of working and will usually result in a 2:1 ratio of reward to risk.
Gradually, the trade will certainly earn money … According to your back-testing.
However, is that 3% a little too much risk for you? It might be OK for some people, but you need to secure your favourable psychology and do what is right for you.
If you reduce your risk to 1% on the trade, you may be able to see things more objectively and make winning and losing less of an emotional roller coaster.
5. Are You Blaming Yourself Too Much?
As a trader or learner, you have to make countless trades throughout your trading journey. However, like every market session, after a certain time, you become the family guy, something completely different from the life of a trader. Repentance for what happened on your professional journey should never detract from your journey. This is a toxic and depressing way to live. If you keep your trading in perspective, you will feel less pressure to be right all the time and will be able to trade well.
So, the next time you have a losing trade, ask yourself these questions. They can assist you in reducing the psychological influence of your trading profession.