How to Turn Your Losses to Lessons
Veteran traders are no strangers to losses. In fact, 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 because he knows how to recognize his mistakes.
And as traders, we can say that this concept is one of the most important 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 there is no guaranteed trading system that 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.
Rather, 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 to first 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 note, 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 everyday.
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 totally 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 go 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. Register for a FREE workshop today by clicking on the link below to know how you can have the grit of a Forex trader and build your wealth.