Rebuilding Your Confidence After a Loss
According to the results of a study conducted on over 43 million trades worldwide from Q2 2014 through to Q1 2015, across the 15 most popular currency pairs; more than 50% of traders made money most of the time and closed out at a gain.
On the other hand, despite accurate analysis, recent research also reveals that 99.6% retail forex traders are unable to see more than four successive quarters of profits. Studies have also shown that traders lose more money on their losing trades than they make on their winning trades, which ultimately results in a net loss.
Cost of Losing Confidence in Forex
One article by ‘The Balance’ stated that more than 90% of traders who lose money in forex trading end up quitting, especially new traders, who might already be less confident about their trading abilities.
Of course, there are many reasons why traders lose money, such as not understanding the market properly, managing risk poorly or making trading decisions based on emotions like fear and greed. However, once a trader loses confidence, this can act as a major setback.
If a trade isn’t immediately profitable, most traders end up suffering from a feeling of remorse. It is common for traders to blame themselves for making the wrong choice. And, if the loss is large, the trader might experience all kinds of inner conflicts, such as frustration, fear, anger, the need to take revenge, hate for the market and more.
Here are three easy ways a trader can win back their lost confidence.
1. Stop Trading Immediately
All traders have good days and bad days – even the most experienced. But, when things go wrong, it’s a good idea to stop trading and work out what happened – and what could have been done to prevent high losses. Learning from failed trades is one of the best ways to improve your overall trading strategy.
2. Focus on a Strict Risk Management Plan
Effective risk management separates successful traders from those who fail. Before delving into the trading world following a loss, you need to have a comprehensive plan in place that takes into account your trading style and your risk appetite. While some traders like taking risks with the hope of making high profits, others would rather make a series of small trades to minimise potential losses.
What’s more, when opening a position, never fail to place a stop loss order immediately. You can choose between a fixed stop or a trailing stop, based on your experience and skill. Most often, traders place stop loss and take profit orders simultaneously.
3. Enhance Your Learning
Instead of focusing your energies on calculating how much money you’ll make once you become a skilled trader, focus on the process of becoming one. All too often, traders get wrapped up in the money-making process when they should be trying to learn the ropes. One of the best ways to improve is to practice your strategies via a demo account. There is always something new to learn and with daily news affecting the markets, it’s essential to stay up-to-date with all of the latest market developments.
And remember! Losing money is not the end. There will always be trades that go wrong. You need to dust yourself off and learn from failed trades to keep growing in the forex market.