5 Ways to Stay Positive After Some Losing Trades?

managing-lossesTrading is a game of probability and every Master Trader knows that losing is part of winning. Believe it or not, many Master Traders lose more than they win but they are still profitable traders. In fact, one of my coaches (a FSA regulated trader) once told me, to be a good trader, you need to be as mechanical and as emotionless as possible.

So the real question is, how do you become mechanical and emotionless? From a practical point of view and for new traders, how do you manage to stay positive after some trading losses?

Here are some of my personal suggestions. 5 things that you can do to manage yourself and your trading and remain positive.

1. Learn To Expect Nothing

Many traders go into a trade with mountains of expectations just because the trade setup met 11 out of 10 rules on the check list  Yet, they forget that one of the fundamental truths (see related article) about trading is that Anything Can Happen.

Call me idealistic but the logic behind it is really simple. If you enter the market with no expectations, then you really have nothing to react to. And if you have nothing to react to, then no management is required. Right?

Think about it, having expectations or hope is one of the many things that trigger your emotions. As a normal person, it is simply unrealistic to eliminate you emotions. Hence, instead of trying to control your emotions, you should try to control the trigger points.

2. Leverage on your Risk Management

Traders who fully apply good risk management techniques can rest assure that there is nothing to worry even if they have multiple losses. For example, the risk management I personally use ensures that I have:

  • Small winners
  • Big winners
  • Small losses

As you can see, no matter how often I lose, I know that my risk management will protect me from catastrophic losses and I will have time to regain those loses and more when my winners come kick in. In fact, I am so comfortable about it that I rarely think the consequence of losing. Again, knowing that you are secured means you have nothing to react to when your trades go against you.

1 percent rule

Now, instead of just talking, let’s put some numbers on the table by taking another example.

Say you have $100 in your trading account and you risk manage all your trades diligently by only risking 1% of your account balance. Did you know that it would take you about 458 continuous losses to shrink that balance to only $1?

So, how do you feel now? Can afford to lose a few more trades and still press on?

3. Take a Break

Some times, it is worth taking a break from trading. Shut down your charts and go take a walk, have coffee or, better still, go meet and talk to people.

What ever you do, make sure to recalibrate yourself, more specifically, your mental state and only continue trading when you are back in the right mindset – one with clarity, objectivity and non-emotional state.

Do not be despair if you have to resort to this option. In fact, be proud because not many people can control themselves and be discipline to walk away. Do it once, do it twice and, as you continue to become a better trader, you will only improve and likely to have to walk away less.

4. Be Proactive and Not Reactive

reactive-proactiveIf you want to stay positive even after some losing trades, then it’s also worth taking a proactive approach to losing -as oppose to being reactive to it.

For many, they use the visualising technique. This involves relaxing and trying to see yourself already having lost the trade before it happens. This is some what similar to having no expectations but you make an effort to mentally rehearse the lost. By rehearsing it, you will include your emotions in the rehearsal and start to anticipate how you will feel so that you will not react to it if it does happen.

Many Master Traders probably do not use this technique but they have gone through enough winners and losers to know how they feel. In my view, that is an reactive approach and that is in line with my next point below.

Don’t get me wrong, I’m not saying that visualisation is the best way. But I’m suggesting that you should find the method that best fits your personality. And, to me, that is being proactive.

5. Practice, Practice, Practice

Let’s be brutally honest, there is no easy way to react to trading losses. If you are expecting me to give you a magic formula, then I am really sorry, as I don’t have one. Going trough losses is not easy because, for many, these are your hard earned money and of course it will be painful. However, every time you feel the pain from losing, you have gained new perspective to how “pain” feels like. From personal experience, I can honestly say this – it only gets easier because you start to know how your emotions will react and to a certain extend, you get immune to it.

Some would think that getting immune to losing is not a good thing. Agree, but you’re missing the point. When you are immune to losing, it is because you understand yourself better and you are better at managing your expectations and emotions. More importantly, when you are immune, you are emotionless and you can focus more on making rational decisions.  And that is the ultimate goal of staying positive.

Conclusion

There is no best  way to moving on after a streak of losses. Some times, even I struggle with it. However, you really need to make a conscious effort to move on. In my view, staying positive is one of the best approach so that you will be able to take the 5th trade with confidence even though you have lost the last 4 trades.

Thank you and happy trading!

 

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