Starting to trade on Forex, the absolute majority of newcomers imagine this exchange as an endless field of opportunities to get a solid profit. So it is partly, but novice traders should take into account that the currency market is a place where you can both make money and suffer significant losses and even completely lose the deposit.
This material contains useful information on how to cope with severe stress after a defeat and not to be discouraged in case of loss in your trading account. Find out what to do in order not to lose self-control, to get out of the critical situation with honor and continue confident movement to success on Forex.
Analyze the situation carefully
The first thing you need to learn to do in case of a loss is to analyze it. Honestly answer the question: why did this happen? Understanding the "nature" of losses will allow you to avoid the very stress that can literally tear the trader apart from the inside.
Determine the type of your loss – is it normal or emotional?
Normal losses are loss trades that are part of your trading strategy. I think it's no secret that in trade there is no method that would give 100% profit throughout the time of work on the market. For this reason, each trader's trading strategy has a certain percentage of loss-making trades, even if the trade is consistent and disciplined.
As for emotional loss, it means losses caused by excessive emotions that were not planned by the trader. Emotional losses are mainly caused by the situations when the trader is motivated by the desire to recoup, compensate for the lost money quickly. In such situations, emotions such as anger, revenge, greed, etc. are activated. In this condition, a trader can inflict great damage on their trade deposit or even lose it all.
Be cool about the loss
Do not get upset after the first loss or even after a series of losses. Trade should always be considered in the long term, so you need to have a clear plan for your work on the financial market. To achieve success, you need to know the mathematical expectation of your trading strategy. If you, for example, make 100 trades a year, it is quite possible that you may have a period when you will have several losses in a row or even a series of losses.
Time is one of the determinants of the trader's profitability. You can even have more unprofitable trades than profitable ones, but in end, if your trading strategy is designed to receive a profit, for example, twice as much as a loss, you will still get a good annual profit even with this ratio. In trading you need to know your calculus, otherwise the win will always be in the market.
Lose the negative emotions
You need to realize that if you succumb to the influence of negative emotions and start worrying about each losing position, you won't do yourself any good. Do not let yourself to be sucked in the failure. In these moments, you will be visited by the thought that you are such a loser. Such meditations are the biggest enemy of the trader. Do not let these seeds sow in your subconscious, otherwise you will not see any profit anymore.
Negative energy has a very great destructive power, so you need to lose it as soon as you start to have thoughts of a similar nature. To deprive such thoughts of their toxic effects, you must always keep in your mind the larger picture of your trading plan and focus on the long-term pattern of your trading path.
Do not waste your energy for the minor setbacks that you will meet on the road to success!
Take a break
If you have already experienced the power of emotional losses and there are negative numbers on your trading account, the best solution is to take a break from the deals and gather your thoughts about what to do next.
A break will give you an opportunity to assess your situation and understand what were your mistakes. The stage of recovery after defeat begins with an understanding of the nature of your losses. Walk through each of the above items and analyze the malfunction in your trading. If the mistakes were made as a result of emotional decisions, you will need to reflect and determine what kind of feeling prevents you from trading well. Then you must return to the basics so that you understand what you are doing in the market, if you have a trading strategy and if so, why you do not follow your trading rules.
In the event your loss was sustained due to your trading signals (normal losses), you can continue to trade by your method, but it is advisable to establish an affordable loss limit, for example, per day or week, depending on which trading method you use - short, medium or long term. This is what successful traders do. They know in advance how much they can afford to lose, and how much to earn.
What to do if you lost the deposit?
First of all, don't get upset and panic. This is a normal situation. Most successful traders lost more than one deposit at the beginning of their career, but the success stories prove that such seeming failures become a good starting point for future victories.
A striking example of this pattern is Jack Schwager, a successful trader and best-selling author of Market Wizards (1989) and New Market Wizards (1992). He decided to start an independent trade with a successful experience as an analyst in well-known brokerage companies. Having borrowed $2,000 from his brother in order to start his business, Schwager managed to immediately lose this money despite his rather good understanding of the market! He lost the trade deposit more than once, but continued to move along the chosen path. As a result, Jack Schwager achieved outstanding success in trading, and also developed several technical indicators and through his books introduced a wide range of readers to the success tips of the most outstanding traders in the world.
My friends, to sum up the above practical advice, I will only add one thing: the loss of capital must be perceived as a mistake that will make you stronger, and a proper attitude to such a situation will help you avoid losses in the future. Remember: every defeat is part of a great victory! Good luck and big profits to you!
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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.