For most traders, the hardest part of trading is dealing with losses. New or struggling traders seem surprised when it happens, for some reason. The fact is that losses usually push traders to make their worst mistakes which can cause even greater losses.
How to deal with them?
First of all you need to have proper money management. As a Trader always protect your bank! Pro Traders could use different strategies, sometimes opposing each other, but they cut their loss quickly, or they already being prepared to lose some percentage of their stake. The main reason to stop loosing on any exchange is to a defined process, to each trading session. You need to have clear entry and exit points. Repeating the schemas many times and measure them will give you the most important information about the particular strategy that you are using.
Secondly, you need to have a strong mindset! If you do not have it yet, then you will have to change your habits because you will be losing money! You need to overcome those obstacles. You need to admit that you were wrong and accept the loss.
This is the tricky part!
How to handle it if your strategy works and you have the losing run of 10 trades?
Today I will give you my approach of dealing with losses!
The first thing is my environment. I have to be comfortable before I enter the market. I never trade when I’m angry, hungry, and when the kids play around me. I don’t want to be interrupted by anything.
If my trade goes wrong, I check my entry and exit points. If it was good trade that gone bad, I move on to another one. If not, I am out of the market! I just don’t trade any more that day.
The same thing is when I encounter 3 losing runs (even though trades were correct). Basically I am pissed off, it is human nature, that it is difficult to accept it. So in this situation, I’m going out for a walk with headphones in my ears and listen to the music that expresses my feelings, and helps me to calm down.
In a nutshell escape – this is what I need!
Recently, my friend Marek Depa released an album called Escape From Reality, which for me is actually a break from this reality. The album is devoid of lyrics, the leading role is played by guitar appearing in various incarnations. If you like rock music bands like Dream Theater, Pink Floyds, Metallica, Led Zeppelin, and artists like Steve Vai and John Petrucci, then you definitely need to listen to this music! Devil’s Dance from his album is a heavy seven-string guitar song that expresses my feelings after a loss. However, my best songs are Escape from Reality and Coming back to life which makes me feel comfortable again! The great thing is that you can listen to the full album on youtube for free! However, if you like to get your own CD you can contact him directly on Facebook.
All in all, your goal as a trader is to get you in the right mood/mindset for both good and bad trades. These simple steps help me maintain my confidence and improve my results. With a fresh head, I avoid bankruptcy, and this my real goal!
