Trading losses can be hard to digest and sometimes overwhelming. It is very easy to get lost in emotions and ignore all the valuable lessons losses bring to us.
So what should you do after losses? What is the best way to deal with it?
Let’s find out!
1. Know that it is a part of the game:
Losses happen even to the best of traders. Know that it is part of the game. Be comfortable with this fact. Know that in the long run, if you keep improving, things turn around.
2. Avoid large losses:
Do not be in distress about a large loss. What is the easiest way to do this? Do not make a large loss. Keep your risks bearable.
Take smaller positions. Hedge them with protection. If you cannot sleep peacefully with an open position, you are trading too big a size.
3. Take a break:
If a big loss happens to you, take a break immediately. Do not try to recover this money right away. Here is why.
If you lost money, you may not be trading well, your view is wrong, or you are in bad form. Why do you want to take more trades in bad form? Resist the temptation.
4. Avoid the markets:
If you have difficulty in staying away from the market, use the kill switch given by the broker. Or seek help from your family or friends. Or distract yourself with something else.
Stay away from the market till things become normal for you from a psychological point of view
5. Don’t revenge trade:
Some people get into the mode of thinking, “Let me recover my losses, and I will stop trading”. That is just a bad idea. If you are bad at trading, then you will lose more money. And if you are good, why stop with just recovery?
6. Don’t trade to recover losses:
When you start trading again, do not trade with the aim of recovery. Our minds can achieve what we want.
If you just want breakeven and recovery, you are aiming low, and you will only see trades that help you get there. Forget the loss. Trade normally in your style and system
7. Give up trading:
Yes, you read that right! Sometimes, giving up is a good idea. Trading is not for everyone – It may affect your job, family life, peace of mind etc. Or maybe poor ROI or losses.
If I am a bad athlete, no point in me trying to be Usain Bolt. I am better off doing something else. The same applies to trading
8. See the bigger picture
Finally, see the bigger picture. Your objective is not to recover losses. It is to make money – a lot more than breakeven. So stop focusing on the loss and recovery from loss.
Focus on the much bigger opportunities out there – whether it is from trading or elsewhere
Always remember what the legendary actor Shah Rukh Khan once said, “Haar ke jeetne wale ko baazigar kehte hain :)”
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