A 4-step strategy to Restore Your Trading Confidence After a Big Loss
When it comes to trading regardless of whether it’s Forex, stocks or Cryptos there’s one major difficulty that everyone encounters at some point.
Yes, it’s being on the receiving end of a big trading loss.
Even seasoned traders will experience a big loss (or several) during their career.
Believe it or not, bouncing back from a big loss isn’t particularly complicated- this can be done by following some simple and proven steps.
The problem is this..
However the real challenge is often trying to repair your shattered CONFIDENCE!!!
But the thing is…
It’s impossible to become a successful trader if you trade in fear.
After a big loss, it’s very common for lots of new traders to have a crisis in confidence and typically leads to problems such as:
- Getting out of trades to early
- Holding onto trades for too long
- Not taking opportunities for the fear losing
- Over-trading in an attempt to recover your losses
Big losses can really play havoc with a traders mindset
But there are ways around it.
I’ve gathered together some tried and tested methods used by top trading experts and I’ve put them into a simple 4 step strategy that you can follow.
1. Empty Your Trading Account!
This is dramatic step you might think, but some traders recommend you not only should stop trading but also transfer all your remaining trading capital to your bank account.
Due to your current emotional state, there’s a chance you’ll ‘Revenge Trade’ to desperately try to recover your losses as quickly as possible.
Needless to say the forex markets don’t work like that and you’ll end up haemorrhaging your trading capital even more.
2. Take Some Time Out
After a big loss panic ensues which leads to anxiety.
When we experience these big emotions it can cause the pre-frontal cortex of our brain to take over and our logical brain to shut down
Our logical brain help us analyse, which is obviously a vital component when reading charts and executing trades…so take a break and clear your head.
Whether it’s a day, week, month or longer, there’s more than 250 trading days in a year so there’s really no need to rush things.
And in all honesty, there’s a very good chance this loss happened because you actually needed a break yesterday just before it happened.
3. Your Trades Are Your Decisions So Accept Responsibility
Some common thoughts that traders have after a big loss include:
- I knew this would happen
- The markets are out to get me
- I can’t do anything right
- I’m done with trading
A mentality like this will never allow you to learn from what actually went wrong.
Rather, take responsibility and LEARN from it.
You need to ask logical questions like, ‘What went wrong?’ ‘Did I follow my plan?’ ‘If not, why?’ Was it down to a lack of focus? Lack of Experience? Lack of practice?’
These types of questions will help you identify your mistakes so that you can fix/learn from them and move on as a better trader
4. Score Some Small Wins
There is absolutely no reason to be trading with the same position size as you were trading before.
Scale down your size to at least half or even 70%.
A winning day with a small position size will help increase your confidence allowing to increase your position size gradually in the days ahead.
The important thing is getting back to basics, following your plan and becoming process orientated again.
And as I mentioned in a previous e-Bulletin, when you take care of the process the money will follow.
So whenever you suffer a big loss try this approach and see what kind of results you get.
You should find that your confidence will slowly return and provided you maintain discipline and self-control your back on track to consistent profits.
