Trading is about making money in the long term. It's never about just making money temporarily. Always focus on the long term. Remember, all traders will experience losses in the short term, because there's no strategy that can be 100% profitable.
How you deal with losses will affect whether you are successful or not. Losses can be a great opportunity to learn and improve your trading by finding ways to be more profitable in the future by improving your trading by making your strategy more successful.
How to learn from losses
1. Did you adhere strictly to your trading plan?
After every trade, note the details on the price chart. Once you've finished trading for the day, have a look back at all of your trades. If you made three trades, look back at three trades; if you made 15 trades, look back at all 15 trades. If you find it's too much work to look back, you could probably improve your trading by reducing the number of trades you do, and keeping it low enough to be able to analyse.
When looking back at your trades, examine them not in terms of whether you won or lost, but from the perspective of whether you followed your trading plan. There will be losses even if you adhere to the trading plan, and there could be trades where you didn't stick to your plan, yet accidentally make a profit. However, the most important thing is to follow your trading plan. By doing this, you will make consistent trades, and repeating these trades will steadily accumulate profits. Get into the habit of strictly following your trading plan to achieve long-term profit, rather than ad hoc wins and losses.
✓ Have you executed the entry and settlement points as planned?
✓ Have you been able to maintain stop-loss settings and not move them?
✓ Were you able to wait until the price reached your target?
✓ Did you check the news before trading?
2. Is the strategy appropriate for the market conditions?
If markets are more volatile or quieter than usual, you may need to change your strategy. For example, if it's suitable only for range-bound markets, you should change when a strong trend appears in the market.
Get into the habit of analysing the market before trading, specifically whether the current market is calmer or more volatile than usual, and whether it is safe to use your normal strategy. In short, always use a strategy that suits the situation. If you do not use the right strategy for the market you're facing, it will be much harder to make a profit. For this reason, make sure you carry out a thorough market analysis and consider your strategy before trading.
✓ What are the market conditions like compared to normal?
✓ Is it safe to use the same strategy you always use?
✓ When prices are moving fast, are you adjusting your targets and stops further from the entry price?
✓ When the market is quiet, do you keep your targets and stops tight?
3. Do you take breaks between trades?
It's vital to be calm if you are to execute trades correctly. Many individual traders don't realise it, but trading and mental control are closely linked. Trading when you're tired and frustrated will never bring good results. It is also not advisable to trade when you are depressed - if you feel that way, try to relax and do something different for a while, even if it is just for 10 minutes or so, like taking a break from the charts and having a cup of tea.
A change of scenery can also help you to identify problems with your trading and find improvements for the next time. Try not to be too attached to the charts and search intensively for trading opportunities where there might not be any. Always follow your trading plan calmly, and be aware of your own mental state, so you are ready to trade when a good opportunity comes along.
✓ Are you watching the market in a calm state of mind?
✓ If you are experiencing unusual emotions, take a break from trading
✓ Trade opportunities can come up at any time.
✓ Take a break from the market after you have regained your composure
4. Identify when you have been profitable
Analyse how you made profits before, and compare that with your current trading. For example, if you did something previously but not this time, you can improve by correcting that. Or maybe you were unaware of a change in the market sentiment. In this case you should think about changing your strategy, as the one you're using isn't best for the changed conditions.
Many traders are happy when they're profitable, but focus only on how much they've made. However, they should analyse and understand how they were successful so they can profit again when a similar trading opportunity comes along. Understand a profitable process, rather than celebrating a successful result!
✓ What made it different from a previous time?
✓ Have market conditions changed?
✓ Have price movements become more intense or quieter?
✓ Is the market trending or ranging?
5. Ask other traders to look at your trading records
As different traders have different experiences, strategies and ways of thinking, having other traders look at your trades and give you their opinions can help you solve problems faster. Learning from other traders is beneficial not only for beginners but also for advanced traders.
An exchange of ideas between traders can reveal valuable insights, so you should interact with other traders as much as possible. Nowadays, you can connect online without needing to meet in person. Many traders are often looking to connect with other traders. Find people with whom you can have friendly competition and improve your trading.
✓ It's easier to improve your trading if you have someone with whom you can share a market-view, rather than trading alone.
✓ Meet in real life, but also use online
✓ Connect with people with similar interests in trading
✓ Connect with other traders to get new ideas and strategies