Learn to Trade

4 Tips for How to Recover from Trading Losses

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Just like everything else in life, trading will have its ups and downs. You won’t make big wins every day, and there will be multiple days when you’ll face losses. When faced with a loss, traders often start to doubt their skills and tend to become risk-averse, which sadly is likely to worsen their trading performance even further.

 

Facing a loss is an inevitable part of your trading journey. Luckily for you, a setback like this is not something you can’t recover from. In fact, a trading slump can very well be your lucky moment and teach you something about you should manage your trades in the forex market. By doing that, getting back on track will happen faster than you think.

 

In this article, we have therefore gathered a four of our best tips for how you can recover from trading losses:

 

The day of the loss 

The day you face a loss, it’s easy to get tempted into making impulsive decisions. However, take a step back and don’t do anything you’ll regret later. It’s normal for every trader to have a few off days. You should not punish yourself for that. 

 

A trading loss can potentially impact your decisions, so it’s necessary to not do anything until your head is cleared up. You don’t need to recover your recent loss immediately after it occurs, so just take some time off before you make a bad decision. You can always make up for the trading loss later.

 

Accept responsibility for what went wrong

The degree of the loss could vary; it could be a career-changing loss or the most significant loss you’ve ever incurred. It’s even possible that the damage has led to consequences and you need to repay debts in some cases. Once you’ve resolved those issues and dealt with the effects, it’s time to move on.

 

Every trader goes into the game knowing that there are risks involved. That being said, it’s crucial to reflect on the loss and figure out what went wrong before you make the same mistake again. Accepting responsibility is an integral part of trading because you don’t want history repeating itself. Once you know what you could’ve changed, fix the root cause before it happens again.

 

Rebuild your confidence

A trading loss can seriously affect your confidence and make you panic. It’s therefore essential to focus on what precisely makes you a good trader and what makes your trading plan effective.

 

When your confidence suffers a blow, it’s easy to make hasty decisions to try to get back to a winning streak. To rebuild your confidence, you should consider trading with a demo account for a couple of days to relieve the pressure and remember how you got to where you are.

 

Start Small When You Begin Live Trading Again

Once the demo account has successfully rebuilt your confidence, you can start trading again. This doesn’t mean you should restart with a large position size though. After all, it’s better to start small and then gradually increase it day by day. 

 

Ideally, you should consider to take a week to go back to your original position size, depending on the time frame you normally trade with. Remember that there’s absolutely no reason to rush into this – go back to the basics and let it flow from there.

 

As you probably understand by now, incurring losses is a natural part of trading, and it happens to everyone. The important thing to remember is therefore that the loss itself doesn’t really matter – it’s how you recover from it that determines everything.

 

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