Bouncing Back from a Trading Loss

Even though all traders know that they can’t always win, losing still stings. Small losses are everyday occurrences (quite literally) but it’s when a trade that you had high hopes for falls through that it gets hard to bounce back from it. 

This article is for anyone who might be struggling with this type of disappointment or lack of motivation. 

Without testing your patience any further, let’s get right to it.

Getting Some Perspective

Let us be the voice of reason here and remind you of some trading facts that no trader is exempt from. They might seem to be truisms to some, but when you’re down in the dumps these simple truths sometimes help the most. So here’s a quick overview:

#1- Happens to the best of us: No one wins them all, not even the top traders out there. Ask George Soros and even he will tell you about some crushing losses. So of course it happened to you too. There is really no other way to be a trader. You have to be ready to lose some. 

#2- Part of the deal: When you start trading, you are essentially opening yourself up to losses. That is why the amount you invest in a trade is seen as the amount you are ‘risking’. So don’t worry about it. It’s part of being a trader. 

#3- You are not alone: At any time in the market, there are wins and losses happening. Opposing views on the market trends and opposing sentiments is what drives the market. Only one side can win in any trade, the other is bound to lose. It’s fine that you were on the wrong side, next time you might get it right. Look around you and you will find many who are in the same boat as you. 

Now that you find yourself on the losing side what next? Well, for one you can stop beating yourself up about it and think of you next move. 

Let us go over some quick tips to help you make the best of a bad situation because let’s face it, at the end of the day that is all anyone can do.

The loss has happened, there is no taking it back now so your only option is to salvage whatever good you can. Here is how you can do that. 

Tips for quick recovery

#1- Step away for a bit to recoup: After facing a loss, chances are that you will not be analyzing the market with an unbiased approach.

At such a time you are likely to be thinking emotionally and looking for ways to make that money back. However, the market is clearly not in your favour. 

The best course of action then is to step away from your computer and take a break. Make sure you are in the right headspace and have taken some time to process the loss before you come back to start trading again. 

#2- Making room for a loss: Another term for this concept is risk management. 

When we’ve established that you can’t win them all then the best thing you can do is to expect them. Make room for them so that you don’t find yourself being an unsuspecting victim. 

Setting a stop loss, controlling your risk per trade, and improving your technical analysis are all risk management methods.

You’ve got to have an exit strategy whenever you are taking a risk. This will ensure that you are not blindsided. Should things go wrong, you will know what your next steps should be to control damage. 

# 3- Learning: This will allow you to make the best of a bad situation. 

The loss you have incurred can potentially prevent a future one if you are able to learn something from the situation and then implement it to your future trading. 

One way to make sure that you are taking something away from this experience is to keep a trade journal. Record your trades with brief analytical notes to point out where you went wrong. 

This little exercise is very likely to make you a better and more mindful trader. It can also help you understand your trading patterns and habits better as well as see your weaknesses. These are all vital pieces of information for someone who is still in the learning process and is trying to become the best they can be. 

Here’s to hoping that this gave you the motivation you came looking for and that you can find it in you to get back out there. 

However, taking a break from trading altogether is sometimes the right decision too. If you think you aren’t prepared for the market and that’s the reason why you keep losing then it might be best to spend a bit more time learning before you risk any more of your hard-earned money. 

So give it a think and see if you feel you are ready for the market. 

Good luck and happy trading!