4 Steps to Accept Losing Trades and Moving On

Move onOne of the key lessons that traders need to learn is to accept that you won’t win all the time. Guess what? Many of you will probably be nodding your head right now in agreement but, trust me, you are probably just nodding and nothing more. The next time you lose a trade, you will mourn and blame the market yet again and the cycle continues.

Today I will be sharing with you how I accept losing trades and how I manage to move on fairly quickly.

1. Know Why You are Entering The Market

The most important thing you need to learn before you are able to accept a losing trade is to be certain why you enter the market. Many traders enter the market for different reasons but, often, many novice traders enter because someone else is doing it. Copying other traders is fine provided you understand what the other trader is doing.

Having a clear and simple trading plan is one of the best accomplishments you could have. If you don’t already have a simple trading plan or if your trading plan is too complicated, then it might be worth reading my article on “Trading Plan: Writing Instructions For Yourself” (read here).

Also, knowing why you enter with crystal clear reasons will help eliminate ambiguity later.

2. Plan your Trade in Advance

As mentioned in my previous article on planning your trades (see article), I illustrated how I would carefully plan my trade before it happened. The key to planning is to help me visualise how I would execute my trade when it happens. Will it happen all the time? Probably not. In fact, you’ll be surprise to learn that I get much less trades than I plan and that’s the reality of the market – because we are trying to find any repeatable patterns within a random environment.

However, the most important point of planning is to ensure that all your trading rules are met before execution. It’s somewhat similar to cooking a meal. For example, when you want to roast a chicken, you don’t add the spices when the chicken is inside the oven right? You’ll probably spend a good hour buying, cutting and inserting the ingredients BEFORE you start roasting it. In fact, you probably end up double or triple checking the recipe book (your trading plan) before you cook it (execution).

Once you’re ready, just sit back and wait to execute.

Note: Just to a gentle reminder to always include your risk and money management when planning in advance.

3. Follow the Process and Not the Prize

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Let’s say the trade that you took turned against you and you lost. A new trader will always think or calculate how much they lost (negative reaction). They would mourn or find something to blame (negative reaction). In fact, a typical excuse is to say “may be I’m not meant to be a trader” (negative reaction).

Instead of that, I would highly recommend that you should take the following approach:

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  • Go to Step 1 to check if your reasons (before execution) a valid one. If yes, give yourself a pat on the back (positive reaction). If no, then how can you make it better (positive reaction)?
  • Go to Step 2 to check if your execution when according to plan. If yes, give yourself another pat on the back (positive reaction). Again, if no, find out how can you make it better (positive reaction)?

In short, follow the process and not the prize. That just really means, take the positive / logical approach during your review and ignore the actual results as much as you can. This is an important step because focusing on the right thing at the right time is crucial. Many traders would look at the results and focus on negative things before bringing their mojo back up later. In my view, lifting up your confidence takes a lot of effort and it drains your energy. Instead, just skip that and focus on lessons.

4. Focus on the Now

Assuming that you’ve noted the lessons from the losing trades, all you need to do is refocus your energy on taking the next trade. Focus on the opportunities that is available to you now because the last thing you need is to miss a good opportunity.

Example:

 09 Jun - USDJPY Daily

I took the Yen trade according to Step 1 & 2

Yen Stopped Out

How price hit my protective stop.

The above was a trade which I took on Yen (10th June) and how it failed (13th June). Using it as an example, I took the trade and when I lost, I quickly went back to review my I realised that I followed my rules and I did well in both Step 1 & 2.

I was pleased I kept to my rules and very quickly moved on to take the AUDUSD and NZDUSD trades on the same day (13th June) – which turned out to be winners. Had I stopped on focused on the negative results, I would have missed or failed to trigger the new trades.

Conclusion

As you can see, very often, new traders would look on the negative outcome and focus on the negative results. This is probably one of the worst things to look at because this will only insert negative images into your subconscious mind. Believe me, the subconscious mind is a very powerful tool and feeding it with negativity will only cause your body to react negatively.

From a practical point of view, Step 1 and 2 is crucial for making your next trade perfect. Instead of looking at the prize, you should put all your effort into getting the process right. From a Psychological point of view, Step 3 and 4 is vital to move forward. Feeding your mind with positive actions and focusing on what you can do now will help you accept the losing trade, learn from your mistakes and to take the next trade with the right mindset.

 

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4 Comments

  • Jorge

    Reply Reply June 28, 2013

    Live and learn continuously… Nice post! Keep it up!

    • Alwin Ng

      Alwin Ng

      Reply Reply June 28, 2013

      Exactly. Cheers Jorge

  • Monica Revill

    Reply Reply June 28, 2013

    Just the post I needed today! 🙂

    • Alwin Ng

      Alwin Ng

      Reply Reply June 28, 2013

      🙂

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