Legal Law

Day Trading Psychology: How to Survive a Trading Loss

Let’s face it, business losses can be tough. Nobody likes to lose money. As every trader will learn sooner or later, trading losses are a routine part of the game. However, many traders find it difficult to accept unavoidable business losses.

When we can’t accept a loss

It is the ability to accept occasional business losses that can be a key factor in whether or not you become a profitable trader. I am not saying that business losses are encouraged; But how you handle losses can significantly affect your degree of business success.

Refusing to tolerate and properly handle operations that do not work leads directly to business errors. It is the inability to deal with the inevitable losing trade that causes traders to cut short winning trades, move stops in the middle of a trade, hold on to losing trades, average down and not pull the trigger in trading setups. solid.

Learning to accept and deal with business losses can be just as important as doing good business.

Survival tips

Here are seven steps you can take to survive and even thrive when you suffer a loss:

  1. Write down the operation as it occurred: Don’t hide the leak under the rug! You need to learn from the loss (that’s its value), so write it down. Include how you viewed the market at the time and how the market action and its indicators appeared to meet the criteria for a strong trade setup.
  2. Evaluate the trade: Once the trading day is over, go back to what you wrote and see what can be learned. Did you miss the market? Was there something you couldn’t verify? Did you accept the transaction even though it did not meet your business criteria? However, was the business configuration valid? it just didn’t work?
  3. Use the loss as a learning opportunity: Ask yourself, “What can I learn from this trade?” Can you get information about the market action? Is there something in your business behavior that needs to be addressed? Whatever it is, you have the opportunity to understand something new, and that is valuable!
  4. Take immediate corrective action: Do you need to modify your business configuration? Is a rule necessary for personal discipline? Whatever you have learned, act immediately.
  5. Keep your head and attitude right: You always have the option to choose the attitude. You can accept the loss as an unavoidable part of trading and be grateful that you can learn from it, or you can go into a negative, downward spiral of feeling bad, depressed, and even more miserable. Follow the constructive steps outlined here and stay on top of it all.
  6. Remember, trading is based on probabilities: Each trade setup has a probability of winning and a probability of losing. In a large number of trades, an advantageous setup will pay off. Any given trade is always uncertain. This is the law of probability trading.
  7. Go to others: We all need support. Talk to your business partner, mentor, partner, or spouse. It helps to download a bit and you can gain a different perspective.

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