4 Ways To Deal With The 4-Letter L-Word In Trading
Loss. Not love, unfortunately, that has nothing to do with your Forex trading. Loss is a difficult thing for many traders out there and we need to get comfortable talking about it right? Loss…Loss…Loss say it with me Loss…Loss…Loss.
I know some of you may be feeling a tightness in your chest from just saying the word and I need to realize that if you do feel like that, it is anxiety. The idea or fear of loss makes you anxious. That doesn’t make you weak or cap your potential as a trader, it can actually fuel you.
A trader’s aim in the markets is to make money not lose money, so the idea of loss makes anyone uncomfortable when dealing with money. A trader needs to think Win…Win…Win while being willing to deal with loss.
Your goal, say it with me, is to win…Win…Win. But that does not mean you won’t lose. You cannot let this little four-letter word cripple your trading. So you’ve got to learn to deal with it.
1. Write your feelings down
Journal your feelings. For the men, and some women, out there who think being in touch with your feelings makes you weak, then you must accept that your trading results will be weak. Trading has so much to do with you being aware of why you make the decisions you make. That way, you can stop yourself from repeating bad habits that don’t serve your bottom line.
“Why did I move my stop loss and increase my risk? Because I had faith that the market would turn around which it always does”. This is the kind of honesty you can benefit from, knowing that that behavior is destructive and that it is something you need to actively try and deal with.
You may have never known if you weren’t having these conversations with yourself. Personally, I make recordings so I have an “audio journal” if you will because I hate the idea of writing my thoughts down, I think faster than I write so I have trouble doing it.
2. Lose Less!
Risking 10% on every trade will obviously make it difficult to deal with losing any trade. Especially if you’re trading money that you cannot afford to lose. Risking a lot on any one trade can make anyone have sleepless nights.
How do you know if you’ve risked too much? You cannot stop checking up on the trade. It is a natural reaction, your brain forces you to pay attention to anything you deem important.
One trade should not be important, ONE trade?? The outcome of one trade should not be the be-all and end-all of your bottom-line.
3. Take a break
It is very easy to become obsessed with your trading and although I’m an advocate of this behavior, I think to be successful at anything you need to give it your undivided attention and effort until you reach the point where you can perform effortlessly or automatically or habitually or whatever word you can think of that means you have trained yourself sufficiently in the art.
But… some people can take it a little too far. A loss or a string of losses can lead you down a rabbit hole of trying to make that money back. That mindset is very dangerous and can affect confidence and psyche, not to mention the money that people have lost in the pursuit of break-even.
Decide beforehand what your limit will be and stop trading once that limit is breached. If you’re an aggressive trader and you decide that a drawdown of 30% is too much because you think you will start acting irrationally then if that drawdown occurs take a break. A week, a weekend whatever you’re comfortable with to get you back on track.
4. Talk to someone!
Trading can be a lonely journey and for me, I’ve been blessed with the two other handsome devils you see in the “About” page.
Having a group of traders and friends or mentors that you can talk to will help tremendously in feeling like you’re not the only person in the world dealing with this psychological warfare. It helps talking to people who can relate to you and what you’re going through.
Join communities and Forums that can introduce to other traders at different levels that are probably going through exactly what you’re going through. We have a community right here on Trading Dispatch – Talk, Chat, Trade It’s all Love. Another 4-letter word.
Don’t bet the farm.
Don’t lose your shirt.
Cut the L.
Keep the W.
How to deal with loss FAQ
Yes losses are normal. A trader’s aim in the markets is to make money not lose money, so the idea of loss makes anyone uncomfortable when dealing with money. A trader needs to think Win…Win…Win while being willing to deal with loss.