For most Forex traders, the most difficult part of trading is dealing with financial losses. It is not just a matter of grief and distress, but the fact that these kinds of situations are what usually push the traders to make worst decisions, which often leads to even more losses, creating a loop of disaster that most traders recognize as uncontrollable.
Situations such as these can trigger them in doing self-destructive behaviors, such as overtrading and over aggressiveness, which are proven to do more harm than good to their trading results.
Here are some of the things you should remember to be able to react properly in the event of a losing trade:
Accept the Fact that Not Every Trades are Winning Trades
Instead of seeing your losses as a mistake, or a failure, keep in your mind that these kinds of situations are inevitable in forex trading. Acknowledge these events as a normal part of trading. Instead of hitting yourself for losing a trade, shift your mentality for what a loss actually means. Losing a trade doesn’t mean that you’re a loser, stupid or a bad trader. Instead of grieving over your losses, try to treat them as the cost of running your “forex trading business”. All other businesses pay taxes and other bills to be able to run their businesses, but as a trader, the only thing you pay for, aside from spreads, is the losses that you take.
Do not Suddenly Increase your Trading Positions
In the event of a loss, it is only normal to feel wanting to win back the money you have lost in a trade. The first idea that might come in your mind is to increase the size of your position, thinking that it will help you to easily win back the trades you have lost. However, overtrading, or revenge trading as they may call it, may only worsen the bad situation you’re currently in. Remember, your sense of judgment and your ability to make logical decisions might be impaired at this point, so better not make decisions that can potentially lead to a bigger disaster.
See Each Trade as a Separate Event
Do not let the mistakes you made in the past negatively affect the decisions you are about to make in the future. See each trade as a separate transaction, each with own circumstances and objectives. Do not let your bad trades push you in doing irrational decisions. Instead, learn from these mistakes, and use them as a tool to make better trading decisions in the future.
Learning how to react properly to a losing trade is one of the most important factors you need to understand if you want to be successful in forex trading. Learning how to do so can help you make the most effective decision on how to earn those losses back and earn extra profit.