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Picking Yourself Up After a Loss

Recover after trading loss

How to get right back into trading after a crash

We’ve said it before and we’ll say it again – Trading is hard. In fact, trading as a profession is one of the hardest jobs out there. If you pooled together everyone who’s ever tried to make it and compared that number to those that actually have, well, you’d find exponentially more losers than winners.

The main reason why you’ll find so many more failed traders is because in this job, there’s no room for being average. Success in the market is simply whether you win. You won’t survive very long is all you do is lose money. There’s no middle ground in the profession like there is in other jobs, as other careers have a spectrum of performance. In trading you either perform or you don’t. No one can argue with the market when it decides to push you out if you can’t win.

Although the vast majority of people who trade won’t be successful, when you’re on your learning curve, the vision of success needs to keep you afloat because you will undoubtedly encounter many events that push your patience and bring great stress. At a certain point you’ll also have the feeling that you’ve already figured things out and you know how to succeed. This premature confidence can burn you if you then decide to go and throw money around before you know exactly what you’re doing. Imagine you commit to learning for 6 months but after 4, you think you’re confident and ready to trade. Deviating from your scheduled learning tract can be tempting but it’s important to stick to your plan. Because let’s face it – there’s a higher likelihood of feeling failure and despair than there is of feeling success and pride. So, what do we need to change in order to grab success?

Well, first off, if we know there’s one person who can make money in financial trading, there’s no reason why we can’t do the same. The goal is possible to achieve and we just need a solid process to overcome our failures along the way.

Another thing that’s quite ubiquitous though not unique to trading, is that’s incredibly lonely. You’ll learn alone, experience market events alone, and without a coach or mentor pushing you along, it’s very hard to go through the process of experiencing failures and picking yourself back up.

Now for the Good

As we just mentioned, as long as others are making it, you need to believe that you can too. This means staying positive in the face of enormous adversity and frequent setbacks. Set a goal for over the hill, put your head down, and keep on moving towards it.

This means that every time you feel you blew it, change your perspective and terminology. Get yourself to believe that there are no failures, only events to learn from. When you first started trading, you didn’t even know a fraction of what you’re working on now and nothing was perfect. Every time you don’t succeed, it just means you have more things to add to your experience and draw insight from. The best traders have a road behind them littered with poor trades and losses. These things are just speed bumps required to correct your course and to get you to really focus and zero in on the art of trading.

Think of yourself as a child learning to ride a bicycle – every time you fall, someone should be encouraging you to get back up and try again. This is how the early days of your trading career should be approached as well. Taking a long break or running away from the problem is not a viable solution. You can only do a deep examination of why you fell when the failure is fresh. So stick with it and keep moving along!

Other Practical Methods for Coping with Failure

A basic thing you can do to help you overcome blips during your early trading days is to constantly rewrite your trading plan. These revisions will help you perfect your plan and rethink what caused you to lose your way. Included in this reworking should be mapping out what you were struggling with. Whether it was the trading, the scenarios, your work environment, etc. Maybe Facebook was distracting you, maybe it was your computer setup. Whatever the root, run through all possible variables in order to create an ideal environment to work in. It might seem trivial but map even the most banal elements. Break it down to your chair, the temperature in the room, etc. this is crucial in order to find any problems and resolve any conflicts.

Another great coping technique is to find a trading companion. This means having another person around your trading activity. It can be a mentor, your wife, your husband, whoever. Sharing your daily trading experience will grow your commitment to analyzing your position and your learning growth. Bouncing ideas off another person is incredibly effective when it comes to shedding awareness on potential problems.

Since your speaking out loud, you’ll be more insightful, and articulate when explaining your experience in trading. Eventually you’ll know yourself, your strengths and your weaknesses better. This other person can also challenge you with new angles and ways to see yourself and your actions. Even though much of our trading lives happen while we’re alone with ourselves, don’t let yourself fall into a lone wolf scenario. Talking out your experience will help you avoid the echo chamber of your mind.

Getting Back In

When you’re back to trading after suffering a sequence of losses and your confidence has taken a hit, many people will opt to trade less money or go back to the drawing board and demo trade. This behavior is wrong and runs counter to the ideology that you need to get back up and try again. Sure it’s money that was lost but by not jumping back in and confronting the problem, you will only deepen the loss and compound the failure. Creating more distance from real world experiences will create more fear of getting back to live trading and making it work. Go back to live trading in smaller amounts if you have to but don’t retreat into simulations or demo trading. Your education already took you through there and you’re past that stage in your trading career. If you want to trade for a living, you can’t go back. Pull on your boots and get back to it!

Photo by Vidar Nordli-Mathisen

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