Fear of loss! 5 questions to ask yourself after a loss
When you lose money as a result of trading, and it's bound to happen more than once, ask yourself these five questions. They will help you get back to a peaceful state of mind much faster.
One of the biggest psychological problems (if not the biggest), which absolutely all traders face in the process of trading, is loss of money. Sometimes these losses can be very large and extremely painful. And it does not matter what they are caused by - lack of experience, inattention, or a trivial mistake in calculating the position.
Even if you have done everything right, losses can happen. Moreover, if you have done everything seemingly right, but still lost money as a result, such losses are always perceived by us much more acutely.
Losses have a stronger psychological impact on us than gains.
In a sense, it is probably impossible to achieve a completely calm attitude to losses. But any trader, even a beginner, is perfectly capable of minimizing the emotional response to failure.
Don't get me wrong, I'm not talking about losing 50% or losing the entire deposit altogether. Absolutely not! But even with a competently set loss limit of 1-2% from the deposit, losses will still cause an unpleasant emotional response inside. Sometimes it is so psychologically exhausting that after two consecutive losing trades the trader cannot return to trading for a week, constantly blaming himself for what happened and falling into deep doubts about his competence.
So how do you solve the problem of fear of loss?
These five questions I want to offer you today are for you to ask yourself after a loss. They will help you accept the situation as a given, stop bemoaning the loss and focus your attention on the next trade.
You can use them occasionally, as needed, or you can print them out and hang them next to your monitor. However, if you feel that unprofitable trades affect your psycho-emotional background and are detrimental to your trading, it is better to use them.
1. Am I confident in my system, and do I know it well enough?
Before trading, applying any trading systemyou have to do more than just test it on a historical period. This is self-evident. It is necessary to understand how the chosen system fits your character, your way and speed of thinking, your temperament.
And not just any system. The asset you're trading, the working timeframe. Even the most active time of day for trading is also important. Some people are more active mentally in the morning, and some in the afternoon. It depends on a lot of factors.
But it is important to remember that there are not only profitable trading systems. Any system will produce a losing streak. Sometimes several trades in a row. Therefore, it is very important to remain calm and clear-headed during such periods.
If you are in a losing streak, or it was just one losing trade, but you have doubts about the accuracy and suitability of your trading system, go back to the results of the test on the historical period. But don't rush to change anything yet. You should never make a fuss. Make sure your system is working and this will help you regain confidence and keep moving forward.
2. Can I change what happened?
No matter how much money you lost, there is no way to change what happened. What happened is what happened. If you realize you made a mistake, now is the time to rethink your trading and think about what led you to make that mistake. This may sound trite, but it is highly relevant to the loss.
Negative experiences are a great teacher. Sometimes they teach much more effectively than positive ones.
If you lost a part of your deposit as a result of a series of losing trades, then don't blame yourself and don't engage in self-pity and self-deprecation, going over in your head 10,000 ways in which you could have avoided these losses. It won't bring you peace and it won't bring you your money back. But you can create a decent amount of stress in your nervous system. Do you need it? Accept what happened, draw conclusions and move on. It is important not what you lost, but what conclusions you drew from this situation. That will determine a lot in your future trade.
3. do I want to get back at the market?
The thirst for revenge and revenge overwhelms everyone. It is our nature always to want to punish the abuser. But it is very dangerous to realize this desire. There is a good saying that you probably know well: revenge is a dish that is served cold. If you certainly want revenge, it is better to cool your head, restore your mental balance, and then thoughtfully return what you have lost.
Trading out of revenge is a double problem. Once you get into the heat of revenge trading, all your rules and strategies fall by the wayside.
As a result, losses only increase. In addition to the feeling of annoyance, there is also anger at oneself for having so foolishly ignored one's own rules, lost one's temper and seriously damaged one's deposit. That is, not only sadness from the lost money, but also anger at oneself.
And this can already encourage you to think that you are a bad trader. Such thoughts are very harmful. In this business it is very important to believe in your strength, your abilities and skills, to trust the web, and most importantly, the decisions that you make.
4. Am I taking too many risks?
You can trade quite successfully, but your level of risk may be too high. The risk should be comfortable on two indicators, both in money terms, and in relation to the size of the deposit. Sometimes these indicators do not coincide, which also leads to additional psychological stress.
For example, you can set a rule to risk no more than two percent of the deposit in one trade. And, from the point of view of the rules of capital management, it is correct and extremely reasonable. However, in monetary terms, the amount at risk will be very significant for you.
Even applying elementary mathematics, we can assume that at the risk of 2% of the deposit and the risk / profit ratio of 2:1, with the results of testing the system, which showed 65% probability of a successful transaction, your trade will ultimately be profitable, and quite.
But the monetary equivalent of these 2% can create unnecessary psychological stress. In this case, reduce the risk and start from the psychological tolerance of the amount, rather than from the percentage of the deposit.
4 dangerous states of a trader. Obsessive-compulsive trading
5. Am I risking only money or something else?
What is trading to you? Is it just trading to make a living or a way to express yourself? Or maybe it's a way to show everyone how tough you are? Or are you trying to meet someone's expectations, to prove something to yourself and the people that matter to you? You can speculate and go over your options for a long time.
But one thing is clear: if in every transaction you risk not only money, but a part of yourself, then calm trading will not work.
The point is that there is always something that is a hundred times more important to us than money. This is our self-esteem, our perception of ourselves, our value in our own eyes. If we perceive a losing trade as a public humiliation, the stress will be very heavy as a result. If you want to become a professional trader, you will go through thousands of trades in your career. Not all of them will be profitable.
In this context, it is very important to learn to separate yourself, your personality and your human qualities from the results of a particular transaction and the entire trade in general. Trading is just a business, which may or may not become the main source of income.
You are a human being, with all your pluses and minuses. Loss-making deals, no matter how many of them you have had in your life, are not a sign of your worthlessness and incompetence. You don't have to be right all the time and constantly prove something to someone. Deals are just deals. You don't have to make your own life depend on them.
Those are the five questions. The main thing is to answer them honestly, and then it will be much easier to survive a losing streak!
Keep an eye out for training articles from Fortrader on the Telegram channel! And trade in peace.