Managing Your Mindset In The Face Of Losing Trades.


As I sit in front of the market I sometimes get worried about making a dumb choice due to my lack of understanding of the strategies I am using. When I had to come face to face with losing trades and accepting those stops, my mistake was making more than one trade in my current mindset of fear. Before I carried on trading I should have made a self-assessment of why I was afraid.

Fear comes in when you have a lack of knowledge or understanding of the current task at hand, and the mistake we all make when trading is that we take the trade in any case in the hopes of possibly being right. When you are doubtful it is better to do research instead of making the trade. Fill the gap that is causing the fear and ideally you should be able to reduce the fear.

Then comes the fear of missing a possible trade. Now you are dealing with two fears, which is what I am currently facing…. Quite often. I have been learning more and more about the strategy I use every day and I have found that the more you learn the more your ego, greed, and fears grow. You manage these setbacks by taking time to think about what you are doing.

“Am I entering this trade because I am certain it is a good move or am I doing it because I am tired of waiting and would rather say there is a trigger? and when it fails, conveniently blame it on the strategy or a bad market?”

We are the creators of our own trades. Sure, we have strategies to learn and follow, but the problem is that people do not take the time to learn, but rather want to get straight into the market and make large profits in the first 6 months to a year.

Unfortunately, if you want to be successful in trading you have to be extremely patient, self-aware of your current mood, and most importantly, you have to know why you are entering the market. It must be because everything points to an entry point in the strategy you use; the signal, the price action, moving averages and your own feelings. You cannot have doubt in your decisions because it will influence the next few strings of decisions while the trade is still open.

Now you are putting the trade on the line and as the market moves you are uncertain if you should maintain the position or take the small loss/profit. The bottom line is that fear and greed need to be managed by asking yourself if the reason you are entering this trade is because of one of those emotions or because you are certain it’s the right move.

Losing a trade creates a large opportunity for greed to set its place in the front of your thought processes. Obviously fear also comes into play but in trading, losing a trade and going straight into the next one is because of greed. If you were afraid you wouldn’t have entered the trade, however, by over trading and rapidly exiting and entering trades or even just taking a trade you know you know you shouldn’t, you are being greedy.

When I lose a trade, I was sure I would win, I take a breathe and try to understand where I went wrong and upon the next trade signal I completely eradicate the previous trades from my mind because I have already assessed the trade and figured out what happened. You must be present in every trade. Do not think, “I need to make back what I lost” This is because that thought alone elicits a greed emotion into your current trade and it will inevitably influence you when you will exit your trade – because now you are focused on how much you lost and if your trade doesn’t reach that point you would want to stay in longer than necessary rather than taking a small profit and waiting for the next trade.

The conclusion is that you must think before you enter the market. You must consider why you are taking certain actions and where they could lead your mindset going into future trades. Losing trades must be assessed and upon completion erased from your mind for the duration of the next trade in order to avoid a greedy trade entry. Lastly it is better to miss a trade rather than enter a trade because you think there is a trigger (You must know it’s a trigger).

Happy Trading,

Dylan Peacock, novice trader

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