Psychology of losing trades

There is hardly one trader, who did not have a single losing trade because we are not able to control the market, but we can and must control our emotions.

There is hardly one trader, who did not have any losing trades. The winning strategy does not exist. We must take this as an objective reality, given us in sensation. Losses are an integral part of trading and nothing can be done about it. However, it depends on many things how we perceive them and react. In this article, by words of Simon Klein, a professional trader with over 10 years of trading experience in the financial markets, the talk is about how to apply to the loss-making transactions, how to change your perception of trading as a whole and to avoid many mistakes.

Let's start with the fact that by default the trader must have a plan and strategy. Otherwise, losing trades are inevitable, and even natural. For lack of a plan based on the achievement of a positive result means that the trader does not know what does, and a series of failed trades will be proof of that. On the other hand, if a trader has a strategy, tested and proven its worth, the losses seem to be something abnormal and that way it should not be. We also would like to remind you to trade only with reliable brokers as CherryTrade review broker.

What do you feel, having started the month with six losing trades in a row?

Consider this as an example of tossing a coin. For example, we have $10 000 and we toss a coin 20 times. If the shooter rolls the eagle, we lose $ 100 if tails - get $ 200. It is a strategy with a positive expectation, which should bring an average of $ 50 each time we toss a coin [(200-100) / 2 = 50]. However, this does not mean that there won't be losses. In fact, we do not even know how the results will be distributed. All solves the case. Try doing this experiment, recording your thoughts and feelings after each toss. This will help you understand how you perceive the loss, even knowing that, most likely, still remain in positive territory.

It is interesting to note that in the first series, we have profited the sum that we have calculated - 50 x 20 = $ 1,000. In the second series, we earned just $ 100, and the third - $ 1,900. Thus, over 60 flips, we earned $ 3,000. Now imagine that you started the month with the result of the second series. What do you feel, having started the month with six losing trades in a row? Most beginners, in this case, give up, believing that this strategy does not work, and are accepted for the search for a new Holy Grail, which does not exist. Such traders are experiencing constant and rapid changes in emotional state like on a roller coaster.

It would be easy to continue to follow its strategy (assuming that it is time-tested and have been proven effective in the past). With a sufficiently large number of transactions of probability theory will work in your favor. To minimize emotional stress, you just need to internally accept the fact that the outcome of a transaction or series of transactions does not mean anything. Indicators in the long term - that's what really matters, as well as trading with trustful brokers such as CherryTrade review broker.