That sounds like a down subject, but it’s not!
My losses produce some of my best trading opportunities.
So, What do you do after a loss?
I’m pretty sure I’ve tried everything – trading more, trading less, changing strategies, getting mad, getting focused, or just taking a nap!
Since none of those things work, I figured out something that does work, albeit somewhat unconventional. No surprise there!
Here’s the scenario:
Suppose you have a trade on and the market moves against you. At some point you decide to close the trade at a loss; or you had a stop-loss in place which closed your trade at a loss.
Here are some possible different things you might be thinking:
- I made a mistake.
- I was wrong.
- My spouse is going to kill me!
- I must not understand the setup.
- My trading strategy or indicators failed.
- I failed.
I completely understand the normal emotional reactions to a loss, but here’s a truth that might change the game for you, like it did for me.
It’s impossible to be wrong.
You can’t be wrong about something that you don’t know. No one knows whether the market will go up or down, and no one knows when it will happen. When you don’t know, you’re neither right nor wrong.
It’s not about being right, it’s about being ready.
Here’s a tip that will help you.
Turn your next loss into a surprisingly great opportunity.
Trading is about identifying repeatable patterns in the market, so that you can anticipate what comes next. No matter what your strategy is, when you make plans to buy or sell, there’s an element of guess about timing. If the market’s timing is not there for your trade, chances are good it will be later on.
As soon as I take my loss, I immediately place pending orders so that I will get the same exact trade opened a second time. Most of the time, the market comes back at some point, and I’m ready when it does.
You should take a loss when the market does not move in your favor. It’s not because you were “wrong.” Put that out of your head, and know that if it comes back to your setup, which was probably awesome, it does so with increased probability of going all the way to your target. Doesn’t that sound like “opportunity”
to you? Well… yes!
What you do after a loss defines you as a trader.
When trading gets tough, get tougher. You don’t have to throw away all your hard work when the first position moves against you.
Get ready because your best, most profitable trades might be the ones that immediately follow a loss, when the market comes back with its own timing.