Trading Losses keep happening for a Trader, yet some get shocked and surprised over a trading loss.
Something which is inevitable is the trading loss. But something which we can change is how to survive a trading loss.
In my Last Workshop, I asked the essential question for a trader – How many of you put a stop-loss while trading.
Everyone nodded YES.
I am not surprised.
Next question – How many of you have changed your stop loss after the trade has been initiated?
Everyone raised their hands.
Again I am not surprised.
- 1 STOP
- 2 WAY TO SURVIVE A TRADING LOSS
- 2.1 PLANNING
- 2.2 MANAGING RISK
- 2.3 TAKING A BREAK FROM TRADING
- 2.4 SHYING AWAY FROM LOSS
- 2.5 LEARN FROM YOUR TRADING LOSS AND OTHER TOO
- 2.6 EVERY FALL IS A REASON FOR YOU TO GET UP AND RUN FASTER
- 2.7 CLASSIFICATION OF LOSS
- 2.8 FAILURE AND TRADING LOSS
This is the essence people do not accept the risk involved in trading. Hence they keep changing the stop loss. The reason why they can’t accept the stop loss is they do not know how to handle or survive the stop loss. The negative feeling of getting stop loss triggered is more emotional drag than financial. STOP which is one of the essential principles that we follow alpha trading Never move the STOPLOSS in opposite direction of the Target.
WAY TO SURVIVE A TRADING LOSS
The most difficult thing for a trader is to survive a trading loss.
Now how he survives a trading loss can make him or break him.
If you’ve ever been asked the question:
How do you handle your loss?
Have you not considered the question no so important enough.
Well, let’s find out.
Most people want to bounce back after a trading loss. So does everyone. But most importantly how do you treat your loss.
Are you Planning your trade? And trading your plan?
Once you enter a trading room things change a lot.
You become a different you. And certain decisions you take during that period of time are not part of your trading plan most of the time. When you plan you are not under emotional pressure. Perhaps that is not the case when you are trading and planning.
The loss which arises due to not trading your plan is the first step. Most of the time people plan and do not follow the trade.
At least 30% of the people who start trading Quit after experiencing this.
What do you do?
Plan your trading activity after the market hours.
- Entry Strategy
- Exit Strategy
- Breakout Strategy
- Stock Selection Procedure
Never change your plan during the trading hours. Ensure that you stick to the plan whatever comes. And most importantly stick to the stop-loss.
Very often your loss will trigger and make you think to wait a little while to cover at least part of the loss.
Believe me, this is never going to happen.
And you will only end up losing more than you think you can.
This is the most important aspect of stock trading is Risk Management.
Many of the Traders Plan their trade and Trade their Plan. But still, lose money at the end of the trading term.
This is very shocking. Right!
What is it that went wrong.?
Planning your trade is an only half battle won.
If while planning your trade you have failed to consider the risk possibilities. If you do not weight much weight to the risk management. Then even trading your plan can not work for you.
In simple words, if we talk about Risk Management.
Risk Management is the loss that you can sleep overnight and allows you to stay away from the screen while your trades are in play.
Risk will allow you to trade for a longer period of time.
You should be in a position to manage continuous ten trading losses and still be in a position to trade.
TAKING A BREAK FROM TRADING
How we react to the loss is more important than the loss itself.
Try to trade over the pain of continuously losing in the stock market are creating more turmoil for themselves than any good.
Some may change the strategy all together caveat is if it is long enough tested.
None of the reactions are constructive.
In fact not handling in the right way itself is destructive.
Some individual traders may cut their winning trades prematurely because of the fear of losing the profit, or keep trading to the extend they no more can handle the trades, hold on the losing portions over a long period of time with the hope of making it into profits and at time even take positions which are not part of their trading strategy.
Take a Break
Review your Strategy
Come back with a Bang.
Focus on Opportunities and not on Regrets. Better Risk Management and No Negotiation trading strategy.
Never get into impulsive trades.
SHYING AWAY FROM LOSS
No one is responsible for our Trading loss other than oneself. It is not the market who is responsible, not even the system that we have developed who has to be blamed, not even your broker.
Never blame it on luck.
Take responsibility for your actions and inaction after you have booked your trading loss.
Some people avoid losses just to feel good and right.
Your perspective changes the moment you accept the responsibility of the loss.
Nothing about everything has changed. Only the way you look at the losses will make you a better trader.
Trading loss is not changeable but what can be changed is an attitude to the trading loss.
It is very healthy to accept defeat for one trade and overcome and win in long term.
LEARN FROM YOUR TRADING LOSS AND OTHER TOO
The cheapest way to learn is from other Trading Journal and their mistake.
If you want to experience all mistakes and still be successful then best of luck,
There are many traders who have lost millions in stock trading. You just have to research it.
Another interesting way to learn is from friends, elders, and relative who are into trading.
Avoid repeating core strategy mistakes. This can be easily sorted out by paper trading or backtesting. This ensures the performance of the strategy over a long period of time. Apart from this also gives higher confidence in trading your strategy for a long period of time.
EVERY FALL IS A REASON FOR YOU TO GET UP AND RUN FASTER
Now that you have Learnt from the Fall you have to Reinforce it.
Several studies that simple learning reinforcement over a long period of time has given unmatched results.
Running faster here does not mean doing aggressive more trading.
But trading with apt risk management and the goal should be long term rather than short term.
Traders usually try to replicate the same strategy only if it gives them profit initially. Nevertheless, any strategy would be successful only if it is implemented over a very long period of time.
CLASSIFICATION OF LOSS
Classification of loss gives a better idea of how to treat it.
Most of the professional stock traders ensure that the second types and the most wealth destroying type of loss are not repeated.
First types of loss is the statistical loss. Most professional traders work with Risk to Reward ratio of 1:2 to 1:3.
Since they have assumed risk before each trade and they are prepared for managing the same. They are not emotionally dragged down.
Where the other type of trading loss is because of the attitude towards the market. This kind of behavior is very tough to find out since it’s an internal feeling that is hardly openly told. Secondly, this kind of is very tough to find out.
FAILURE AND TRADING LOSS
If you notice our shared trades which we have been following for last few years and backtested many years. We never treat a trading loss as failure.
A big reason for this is apt risk management.
So the bottom line here is to avoid the second type of attitude losses and manage the second type of statistical loss very efficiently.
Now it’s hard to gain any traction without being able to manage your statistical loss. But treating them as your failure or system failure is futile. The reason why its futile is because it drains your emotionally and does not give you any results.
Do You Have What It Takes Survive A Stock Trading Loss Like A True Expert?
- Do You Make These Survive A Stock Trading Loss Mistakes?
- Do You Need To Survive A Stock Trading Loss To Be A Good Trader?
Nevertheless, bookmark this page and ensure that you keep following over a period of time.
Of course, there are numerous variables that determine how successful you are going to be in stock trading, This is just one of them.
But when it’s all said and done surviving a trading loss is pretty darn important.
Shoot a comment if you have a better way to survive a stock trading loss.