One of the hardest parts of trading to me is handling losses. I mean, I really hate losing money! I have been listening to this video several times for motivation…
But still find it difficult to watch the market move against me. How do you deal with your emotions when handling losses?
Well, there are two different philosophies that you can approach this with. I use a bit of both.
The first one is that people say, you should not try to analyze your losses. They say that when you have a loss, or series of losses, that you are not in a conducive state to analyze your trades, so that you should stop thinking about the market. Just accept them and move on. Dismiss them from your mind. So that you should go spend time and your thoughts on something else. Go for a walk, exercise, go to the gym, spend time with friends, etc. Listen to music, sing and dance, etc. To get better acquainted with the other world outside of trading.
The second option is to approach the losses with an eye towards going to a higher level of trading mindset, strategy, awareness, consciousness. To transcend any negative emotions through more education, love of the markets, better strategies, etc. By higher levels of trading, I don’t mean eliminating losses. Instead I mean attempting to analyze your losses and your methods to try to find that new belief, new revelation, new epiphany that can make you see things in an entirely different way. To contextualize the losses in the grander things in life.
With this second option, you can:
- Read a list of trading quotes.
- Read your trading plan again
- Read key portions of the Order Flow Mastery Course that resonate with you and wow you. (I hope there are many)
- Do the daily habits for that day. Since the habits are designed to approach the market and do a dispassionate study of underlying conditions.
I have noticed that trading problems and bad emotions tend to get compounded if I don’t understand what is going on in the markets. So I try to keep doing my daily habits and stay in the swing of things.
I have lists of books and articles that I can read about the market to further my education and knowledge.
I can review my recent losing trades and see why they lost. I try to see if there is anything wrong with my daily habits, my trading principles, my trading process that may need to change. I like my trading to be principle and process and habit driven. I have a routine that I go through, but since every day is a bit different with a bit different scenarios, it can be interesting and add a degree of creativity and spontaneity to trading.
I like to think about what else I could have done? I kept trying to push myself and my mindset and my methods to better and higher levels, on winning trades as well as losing trades. If I didn’t do that, there was no way I would have been able to develop the principles and strategies in the mastery course. A few failed stop hunts or news trades would have wrecked havoc with my emotions. But I stayed in the game and tried to search for the right information and devised better strategies and ways of looking at the market.
Sometimes, I realize I can’t push it anymore and can’t learn anymore from a series of trades. I got all I could out of them, and then I just forget about them. Other trades are just plain bad luck and there is nothing to change with your system or mindset as everything is still valid.
They key in my opinion is to stay in the game and not to give up. Because you just never know when you might discover the one trading quote, one idea, one book, one article, one person, one blog post, one conversation, one email, etc that can change your life and trading. You never know when you might hit upon the right information, said in the right way, and it can cause a sudden shift in how you perceive the market and change your trading and life forever.
I have had so many of these “aha” moments over the years as I went to even higher levels of trading methods and understanding. When I made the shift from tech indicators to price action, and then to order flow with stop hunting, then to news trading, then to global macro, etc. In each progression there were plenty of revelations and moments of pure joy.
I try to count my blessing as well. I say to myself:
I am happy. (You don’t need 1 million dollars to feel happy. You can feel pure joy and contentment with whatever you currently have, even if it is a little)
I am healthy enough to trade and enjoy life.
I still have sufficient capital left to trade the markets.
I have had an amazing journey so far and come so far, but the best is yet to come.
I have caught great trades in the past, and will do so again in the future.
I have developed so many great skills and habits in the past few years.
I have lists of so many different things I can do to improve my trading and my life, and eager to do them.
Robert Ringer has a few good quotes about life in general that can help place things in perspective:
Ice Ball Theory: in 50 billion years, the sun will burn out and the Earth will be a frozen ice ball. Nothing you do no could possibly matter then. So don’t take yourself too seriously. Life is a game, and play to win. There’s no reason to be afraid to be aggressive or take chances. The reality is that there’s no way you’re going to get out of this thing alive, so why play conservatively.
Mortality Theory: Given that your time on earth is limited, it makes good sense to aim high and move fast.
It’s just a losing trade, or series of losing trades. There will be another day to play.
In the grand scheme of things, 1 month or 1 year or 10 years from now, I know I won’t be thinking about what happened on some losing trade on some day in the past. Who cares? 100 years from now I’ll be dead, and the next generation isn’t going to care either. The next generation is always focused on their own lives and the current moment (as they should be). Do you think that George Soros cares about some trade he placed back in the 1970’s? Or Paul Tudor Jones cares about a bad trade in the 1980’s? Who cares!
You will struggle to focus as much as possible on the present trading moment and all it’s available opportunities if you clutter your mind with thoughts of the past. It becomes very difficult to write the new chapter of your life, if you are still reading the chapter of the past.
Hopefully some of the above will work for you!!