Veteran traders are no strangers to losses. Losses are already a part of a Forex trader’s life. Even the legendary trader George Soros tells us that the only reason he’s rich is that he knows how to recognize his mistakes.
And as traders, we can say that this concept is one of the essential things to ingrain in our brains. If you, as a trader, know how to roll with the punches, then you’ll also know how to learn from the hit and dodge it next time.
So, in this article, we’re going to talk about losses– and how to learn from them.
Acknowledge That You Can Be Wrong
Any trader will tell you that no guaranteed trading system can give you nothing but wins. In the course of your journey, you’re bound to come across losses. The difference between a veteran trader and a newbie trader is that a veteran trader acknowledges that losses happen because they are not perfect.
Instead, they learn from these losses and apply these lessons on their succeeding trades. So the first step to accepting losses and turning them into lessons is first to acknowledge that you’re not perfect and you can be wrong.
Keep a Journal
After acknowledging that you can be wrong, the next thing to do is put everything into practice. The best way to do this is to keep a journal of all your trades. It can be a written journal or a spreadsheet. The important thing is that you monitor the entry price, stop loss/take profit, and strategy used for each trade.
Take notes, you must record all trades, whether win or lose, and write down your thoughts about them. By doing this consistently, you are conditioning your mind not to discriminate between a win or a loss. This kind of conditioning will help you take losses easier.
You’ll also be able to backtrack and see what works and what doesn’t. Eventually, filling in your journal will become a habit, and you can track your progress every day.
There’s such a thing as trading too much. If you go through a big loss, stop trading! Put down your phone or close your laptop and do something else. There’s a huge chance that if you continue trading after a huge loss, you’re going to be clouded. In that situation, you’ll probably do revenge trading (aggressively and blindly entering into trades so that you can win your money back). Revenge trading is something that you will want to avoid at all cost because it is a one-way ticket to a burned account.
So, after you experience a loss, take a break. Go out and meet a few friends or maybe watch a movie. Just go back to your computer only after you’ve cooled your head.
Handling losses is one of the most important parts of trading psychology and is something that you can learn.
Here at Learn To Trade, we have some of the finest mentors that can help you fine-tune your mindset and develop your trading psychology.
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Information on this page is solely for educational purposes only and is not in any way a recommendation to buy or sell certain assets. You should do your thorough research before investing in any type of asset. Learn to trade does not fully guarantee that this information is free from errors or misstatements. It also does not ensure that the information is completely timely. Investing in the Foreign Exchange Market involves a great deal of risk, resulting in the loss of a portion or your full investment. All risks, losses, and costs associated with investing, including total loss of principal and emotional distress, are your responsibility.