Things to Do After Experiencing Forex Trading Losses

In the world of trading, be it forex, stocks or gold, we often hear that many traders experience losses when trading. Almost all traders have experienced consecutive losses that cause panic, stress and even frustration. In the forex and stock trading market, consecutive losses can happen at any time and cannot be predicted/avoided.

Many trader act emotionally after experiencing consecutive losses, which increases the losses and can be fatal. How should we respond to consecutive losses and get back up again? Here is the explanation:

Recognize the Types of Losses

The first thing a trader must do to recover from a series of losses is to know the type of loss experienced. Basically there are 2 types of losses, namely: Normal loss type (loss due to market movements) and loss type due to emotional influence or emotional loss.

Normal loss is a type of loss that statistically must occur. In this case, in every trading system there is always a lossing rate or percentage of loss after several trades even though you are consistent and disciplined in following the trading plan. This is because there is no trading system that has a winning rate or profit percentage of 100%.

For example, if after testing the trading system, the profit percentage is 60%, then the loss percentage is 40%, and if the trader uses that trading system, the possibility of experiencing a loss after several trades is 40%. For example, after 100 trades, the trader is likely to experience a loss of 40 times, it could be a one-time loss or a series of losses, and that is a normal loss that statistically must occur.

Emotional losses are usually caused by over trading due to greed, euphoria after big profits or a desire for `revenge` after consecutive losses. Euphoria after profit makes us too confident or overconfident while big or consecutive losses can make us emotional and enter repeatedly to make up for the losses we have experienced.

In addition, intervention actions on positions that we have opened according to plan can also cause losses, for example shifting the stop loss level because of fear of being touched or immediately cutting losses manually before touching the stop loss level.

Emotional factors often greatly affect the way of trading and are relatively difficult to control, especially for novice traders. Therefore, we must make a trading plan based on a system that has been tested and implemented correctly and patiently without emotional involvement.

Thus we can avoid the habit of over trading and position intervention. Losses caused by trades outside the trading plan are definitely losses due to emotional influences, and we must be able to avoid these emotional losses or abnormal losses.

Execute Trading Plan

The next thing to be able to recover from consecutive losses is to know that one loss or even consecutive losses are not significant for long-term trading performance. As long as the loss is normal where we trade according to a plan made based on a proven trading system.

It is possible for traders to experience losses several times in a row but that does not mean we should panic or get frustrated which can lead to emotional actions and result in trading outside the plan. Stick to the trading system and be disciplined in carrying out the plan that has been made, we will see the results along with the increasing number of trades made.

Manage Emotions

If a trader falls into the trap of negative emotions due to consecutive normal losses, it will not help improve the situation, even the trading results can be worse if the trader acts emotionally. Forex trading does promise unlimited profits, but also unimaginable losses (high risk high return).

This is the reason why many traders can quickly get trapped and controlled by their emotions. In any case, reactions that are only based on negative emotions tend to be dangerous, especially in trading. Emotions cannot be eliminated, but they can be controlled.

Remember that trading success is measured after many trades and in a certain period of time, it can be months or even years, not the results of trading in a day or a week. If previously traders tended to be emotional, now we must be consistent with a proven trading system and disciplined in implementing a trading plan and be able to accept normal losses that statistically must occur. Normal losses are part of the game. (risk and money management).

Quote : In order to recover from consecutive losses, traders must conduct regular trading evaluations. That way, traders can identify trading mistakes and deficiencies so they can complement deficiencies and correct mistakes when trading. That way, trading can be better and produce consistent profits.

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