Accepting the Unavoidable Losses to Improve Your Trading Success

The goal of this article is simple: to help traders with mentally accepting their losses.

taking a risk in trading

Although the goal might sound easy to achieve, it is actually very hard to keep focused on current events and price action.

All traders drift away from current reality because their thoughts and energy are drained by past mistakes, losses, unrealized profits, and unexpected price movements.

Note: I would love to hear how you plan on using this post to improve your focus in general and Forex trading in specific. Please leave me your comments and feedback below after reading today’s article!

WHY FOCUS VANISHES LIKE SNOW IN SUN

Did you ever start out a trading day with a ton of energy? Did you ever start out a trading day where you were fully focused and ready, but as the trading day progressed you lost all of those good intentions?

Snow can disappear quickly in a strong blazing sun; and so can a trader’s focus when losses occur.

On top of that, the market provides a multitude of distractions due its ability to continuously make retracements. Traders also get sidetracked by social media, email, TV, phones, advertisements, and our private lives.

No wonder traders have a tremendously tough time maintaining their discipline. Many solutions were already offered in the article “accepting the outcome and focusing on the process,” but today’s post is emphasizing another critical factor.

EMBRACING LOSSES

It might be difficult to imagine showing empathy to your losing trades. Also, letting your losses become your best friend probably sounds exaggerated to most of the readers. Embracing losses, however, has the potential advantage of quickening the path to success tremendously.

a happy trader is a successful trader

That might be a shocking statement for a lot of readers, so let’s explain.

The process of improvement is a journey. And the journey can never start without the realization that each trade in general and each loss specifically is a moment of feedback. In fact, the market is providing constant criticism.

However, the trader can only learn from the market’s comments if they are open and willing to learn from the each trade and loss. That openness and willingness is often very low. Many reasons could explain this observation.

SOLUTION 1

The number 1 clarification is that people in general can easily accept “positive” feedback, whereas negative comments are a hard sell. Also people have trouble with accepting feedback from an external reference when it does not align with your own vision.

Traders are exactly the same. Obviously traders only imagine themselves having winning trades so losing trades are almost a certain mismatch with their perception. Losing trades are seen as “negative” feedback and the cause of the anomaly is often directed at the market.

The solution is to prepare yourself for losses well in advance. When demo trading, paper trading, back testing, forward testing, testing with a small demo account, and real life trading, always focus heavily on the losses. If a trader were to test a strategy and only focus on the winning traders, then no wonder trading in real life suddenly seems so different.

Focus on your losses, and the winners will take care of themselves.” This is an expression often used in trading; now we know why.

When traders are prepared for, aware of, and expect losing trades to occur, then their mental willingness to recognize the loss will allow them to receive the market information with open arms.

SOLUTION 2

It is vital to recognize the fact that neither the market nor the trades are intentionally hurting you. The market is the market, end of story. It makes no sense to get annoyed or irritated at it, as nobody can “control” it anyhow. Or in other words, nobody knows for sure what the market will do.

A trader, who realizes that the market is not created to hurt one’s feelings, will have an open mind and heart towards the feedback of the market. Then they need to remain consistently flexible and open towards the market’s criticism in order to thrive.

A trader equipped with that philosophy and mindset can embark on the journey of everlasting improvement.

SOLUTION 3

When a trader has implemented steps 1 and 2, they will develop a keen awareness, an ability to listen carefully to the market, and be able to create a higher level of alertness. Traders can then in turn pick up and interpret clues during trading quicker and process them faster without fear hindering their analysis.

Obviously, this is a great development. But a trader needs to be cautious that they make trading decisions within their trading plan.

As a rule of thumb it is better to make evaluations of one’s trading day at the end of the day; not during the day. Although the goal is always to make our trading better and better, our primary goal during the trading day is implementing the trading plan.

Traders want to avoid making ad hoc decisions that do not align with their trading plan during the day. After the trading day is over, traders can evaluate and analyze to improve their trading plan.

A higher level of alertness and understanding of the market will, therefore, help in both cases:

  1. When a trader is implementing their own trading plan during the heat of the battle called trading;
  2. When a trader is evaluating and improving their trading plan after the trading day.

A trader that is able to freely focus on the current price action vis-à-vis their trading plan and is able to avoid getting distracted by losses, market distractions, and personal distractions will create a substantial edge in the field of trading.

Your engagement in this open debate is crucial for starting your own journey successfully. Of course, it is easy to skip this step and move on to the next daily activity, but providing feedback means that you are taking the first step. And those are always crucial in achieving success.

Thanks always for your time and sharing this article. Wish you Happy Trading!

 

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Chris is the head of the mentoring program and trading room at Winner's Edge Trading. He has a passion for technical analysis and helping Forex traders achieve their goals in trading. Chris has been trading for almost 10 years and is most fond of the Double Trend Trap (as a strategy), moving averages (as an indicator) and Fibonacci (as a tool).
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  • Phoebe Ejimbe

    I accept that market will always do what it wants to do. I also accept that losing trades is part of trading. I am comfortable implementing my trading plan and letting the market do its thing. I will then evaluate my trades at the end of day; learn the lessons market presents and make adjustments to my trading plan if necessary. Thanks Chris for this great article!

  • Phoebe Ejimbe

    An interesting article! I plan for my losses but I do not focus on them. My only reason is to play down stress. I will try focusing on my losses and see what the effect would be. Thanks for sharing, Chris!

  • Phoebe Ejimbe

    A very interesting article! I find the idea of planning for losses in advance quite a new concept and would definitely take it on board in my trading. Thanks for sharing, Chris!