Advanced Forex Blog

How to Deal and Recover From a Trading Loss or Losing Streak

June 10, 2020 | 7:25 am | Advanced Forex Blog
June 10, 2020 | 7:25 am
Advanced Forex Blog
How to Deal and Recover From a Trading Loss or Losing Streak

How to get right back into trading after a series of losses

Losing is painful. We don’t like to lose. But in forex trading, losing is part of the business. The sooner you understand that you will experience some losing trades along the way, the better.

No matter how accurate your trading strategy is, some percentage of your trades will result in losses. So don’t worry about those good trades that resulted in a loss, BUT, let’s see what to do if we suffer a series of consecutive losses.

If you are going through a bad losing streak, these are the steps you need to take:

  • Stop Trading, and take a break of 24 hours.
  • Review what is failing, you, or your trading strategy.
  • Tune your trading strategy and stick to your rules.
  • Develop a Positive Trading Mindset
  • Reduce lot size and exposure.
  • Find a trading community or a mentor
  • Get back to trading.

 

recover from trading loss

Stop trading

Think of losing trades as holes. If you fall into a little hole, it will be easy for you to climb out. But if you keep digging and making the hole bigger, it will be harder for you to come out of it.

If you are losing multiple times, you need to temporarily stop trading. Take your time to calm down and review what is causing the losses. We recommend at least a 24 hours break.

 

Review what is failing, you, or your trading strategy.

There are good trades that fail and bad trades that succeed. You need to make sure you are only taking good trades, those that align with your strategy and system.

If you are only taking good trades and still facing consecutive losses, you need to review your strategy. Maybe your strategy works on trending markets or certain timeframes. Make sure you are using the right strategy for the actual market condition.

 

Tune your trading strategy and stick to your rules.

Each strategy is built for certain market conditions. Some work on consolidations, some on trending markets, some during high volatility periods, and so on. You need to have a plan and a strategy for every environment, and once you know what strategy to follow, you need to stick to your rules. You need to be very strict about when to enter a trade and when to get out, as well as risk management measures in place. Make sure you are using stop losses and the right lot size per trade.

 

Develop a positive trading mindset

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 speeding 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!

 

Reduce lot size and exposure.

So you have taken a break and reviewed your strategy. Now is the time to get back to the market and rebuild your confidence. To do so, you should reduce your lot size to a minimum. You want to retest your strategy and your skills focusing on consistency. At this point, you don’t want to make all the losses back, but to get comfortable in the forex market again, and to remind yourself that you are a good trader.

Once your statistics are back to normal, it’s time to increase your lot size again and recover the losses.

 

Find a trading community or a mentor

Now that you feel ready to trade again, you may consider finding 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 you’re 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.

You should also consider joining a community, where you can get lots of ideas and tips, ask questions and get valuable information, there are quite a few communities around the web such as no-nonsense forex.

 

When to get back into the market

Once you have followed the previous steps, you have identified what caused the losses in the first place, you adapted your trading strategy, and your confidence is back. So it is time to slowly get back to trading.

If you want to trade for a living, you can’t quit. Go back to live trading in smaller amounts. Always learn from the market and from your losses, and take advantage of what you learned, you have just become a better trader!

Pull-on your boots and get back to it!

 

Trading after a loss – bottom line

In order to succeed in trading, you need to be able to go back to the markets after a losing streak. If you just quit, you join the vast majority of people that will not go through the process of learning from mistakes in order to become a successful forex trader.

Markets change all the time, and we as traders need to adapt to those changes. A series of losing trades may be the sign that the markets are changing and you are not. All successful traders will face these challenges, so just remember to follow these steps next time you find yourself losing repeatedly. Stop, readapt, and get back in!

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