How to Deal with Losses in Forex Trading
- November 3, 2023
- Posted by: Veronica Marquez
- Category: Education
Losses in Forex trading are expected. This is something that many people have trouble with, whether they are experienced traders or just starting out. Losses are always conceivable in trading. You can minimize them as you gain experience, but a loss of zero is not attainable. Of course, it’s challenging to move on from losses. We can more clearly identify the cause of the issue by comprehending the nature of losses and how they affect our trading mentality. Similar to the phases of grieving, we go through specific steps to deal with trading losses (to deny, to justify, sadness, and acceptance). However, they appear in a different way in trading.
Denial is the first stage.
At this phase, you try to cope with the unsuccessful trade you have faced. By claiming that the loss was not your responsibility, you might avoid acknowledging to yourself and others that your trade plan was flawed. Typically, you can make claims like “I was stop-hunted” or “I didn’t put that much effort into that trade” as an explanation. This feeling might be more prevalent in beginners, but it’s okay. In this approach, you try to lessen the impact on your ego in order to endure the loss and go on.
The second stage is when you attempt to rationalize your trading strategy.
Here, you focus on what you believe to be the positive aspects of your trade concept and ignore any mistakes you may have made. You may mention that your trading strategy, profit target, stop loss, and entry point were adequate. You utterly ignore that you actually lost that trade, though, and that you must have made a mistake somewhere if there is a loss.
After that, depression sets in.
After considering every external factor that might have contributed to your defeat, you reach a point where you turn within and realize that your actions alone are totally to blame. Though accepting responsibility for your mistake makes sense, blaming yourself entirely and persistently having doubts about your skills might be detrimental to your forex career and specialty. This can make you doubt your suitability for Forex trading and whether you should keep doing it going forward. You might even think about giving up trading completely if you lose faith in your ability to grow and specialize and discover no compelling reason to keep doing so. You should not, however, give up at this stage. For those who have gone through this type of self-doubt, the longer the losing run, the more depressed they feel.
When you reach the fourth and final stage, Acceptance, you start to understand that placing the blame for all of trading’s problems on yourself is unhelpful.
At this point, you both acknowledge that some of the loss was your fault and that there are a lot of market elements that affect trading and the Forex market that are out of your control. When you reach the acceptance stage, you stop feeling awful about the loss. You start to adopt a realistic perspective and comprehend that there is nothing you can do to reverse it. When trading, it’s critical to keep in mind that while you can never entirely recoup what you’ve lost, you can certainly make up for it.
To achieve this, one must try to improve their trade, their financial situation, and, last but not least, their mental health and stability.
You can seek ways to enhance your trading approach, engage in improved risk management, or just conduct a study on better loss management.
As you gain experience and over time, you better understand that losses are inevitable in trading. So, as you climb the ladder of specialization in trading, you make it your goal to advance, adapt, and develop.
You can also check our related article 5 COMMON FOREX MISTAKES TO AVOID
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