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Thursday, 8 September 2016

Surviving a Loss

Reality Check

There won't always be winning days, there will be a day where you lose and it could be big. That's the harsh reality of Forex Trading and the sooner you recognize it the better able you will be to deal with the loss when it comes.

As much as i can warn you of the ups and DOWNS of trading you will need to be prepared for it and the effects. However, Nothing can entirely prepare you for it till it happens. You can be sensitized and you can understand that it will happen but all you can do is put things in place for when it does. The key is to always survive a loss. In trading, as with everything in life, everyone can enjoy the good times, the +300 pip gain, the 4 weeks uptrend that you have been riding but the true trader is the one that can withstand 1 or 2 or even 3 huge losses and continue trading according to plan.

Reducing Recovery time

After a loss has occurred whether it has wiped some, most or all of your account the key is to recover in the shortest possible time and always keep reducing your recovery time. The longer you take to recover the more emotions set in and the psychological impact increases. People tend to think a lot over time and this thinking time can drive fear through your trading machinery which can be extremely devastating.

   Check where you went wrong

   Recovery should begin by checking what went wrong and where. If you did something wrong then do what is necessary not to repeat it. If the market was off then ensure to check all market conditions prior to trading. Check through the anatomy of the losing trade so that it doesn't reoccur. This is the beginning of reducing losses in any aspect of life, business and trading:-Identifying the cause.

   Remove Emotions

Emotions are a no-no in trading. Emotional traders are gamblers and lose a lot more than they profit. Step by step, eliminate trading with emotions as it can lead to revenge trading which is a downward spiral of your account. The best way to eliminate emotional trading is to stick to a set of rules.

Always Stick to Plan 

There's nothing more essential to recovering from a loss, or preventing a particular loss in the first place, as a sound and effective trading plan. Your trading plan is your blueprint to create your trading estate. For more info on the importance of a trading plan click here. Even if you lose off of a few trades sticking to a well defined and sensible plan can overcome those losses easily and get back to increasing  your profit margin.

Win/Loss Ratio (P/L)

Pay attention to your Profit and Loss and not necessarily to individual trades although each trade contributes to either a profit or a loss. Your P/L tells what kinda of standing your account is in and how good or great of a trader you are. Keep your average losses to a minimum and ensure your trading plan is effective in increasing your P/L ratio.

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