• Nicholas Anderson

Recovering from a Large Trading Loss

How to overcome loss in Binomo

Whether due to a technological meltdown, a lapse in discipline, or simply a sustained bleed-out of trading capital, nearly every trader will suffer a significant loss (or several) during their career. It is not difficult to recover from a major loss; just follow a few simple steps. What is difficult is repairing the psychological damage done, particularly the damage done to confidence.

While overconfidence can be deceptive, successful traders do not trade in fear because fear can also be deceptive. That level of confidence, where you see the market for what it is, jump in whenever there's an opportunity, cut your losses when it doesn't work out, and sit on your hands when conditions aren't favorable, is the kind of confidence that can be lost after a losing streak.

Is Binomo gambling?

After a losing streak or a large loss, you may begin to doubt yourself, which leads to all of the typical problems that many new traders have, such as getting out of trades too quickly, holding them too long, skipping trades out of fear of losing, or getting into more trades than you should in an attempt to get some winning trades. If you've had these problems or suffered a significant loss of capital, there are ways to get back on track.


Key Takeaways

  • The psychological strategies of dealing with a big trading loss are just as crucial as your investing strategies.

  • Develop your strategies to deal with losses at the same time you develop your investing strategy.

  • Identify and resolve the issue that caused your losing streak before you begin trading again, to prevent it from reoccurring.

The Day of Your LOSS

Every trader has a bad day now and then. As a general rule, never let a bad day cost you more than an average profitable day. If your winning days average $700, you shouldn't lose much more than that on a bad day. Contain the negative.

A significant loss can result in a variety of internal conflicts, including a desire for vengeance, fear, anger, frustration, self-hate, market-hate, and so on. There's no way to trade with a clear head after a big loss. There are over 250 trading days in a year, so there is no need to rush back in; today is not the day to make it all back.

Accept Responsibility

It's a different story if you've depleted your account, had a losing streak, or suffered a large, unexpected loss. You're still in the game, albeit a little battered. Everyone enjoys a good comeback story, and every trader worth their salt has one (or several). It makes no difference if a surprise news announcement caused the price to exceed your stop loss, or if a technology meltdown caused you to lose your connection and the market moved against you.

A losing trade can always be justified. Some are valid reasons, but as traders, we must ultimately accept all risks. Until we accept responsibility for whatever happens with our orders, history will most likely repeat itself, and the same thing will occur again.

Accept responsibility and consider what you could have done differently. That will help reduce the likelihood of it happening again, and it is also healthier than harboring resentment and blaming others for your misfortunes. Blaming others implies that you are not in control of your trading, and if that is the case, why are you trading? You can fix it if you control your trading; if others control your trading, you can't.

There is always some action that can be taken. It could entail changing markets, having backup data connections, or having stop-losses and targets automatically sent out when a trade is entered. It could also entail setting up your platform to liquidate your trades if you reach a daily stop-loss limit. The solution is available; all you need to do is find it. The best way to find it is to admit that the loss was caused by a failure to handle something properly and try think other steps to fix it.

Realign your Focus

You were probably overconfident when you first started, but the market quickly put you in your place. You gained healthy confidence over time by developing your trading system, testing and practicing it, and finally employing it for profitable real-money trading. Confidence is built by completing difficult tasks and improving at them; in trading, our task is to carry out our trading strategy. As we see positive results from that trading strategy, our confidence grows.

Get back to basics after a major loss. Concentrate on the trading plan (along with any changes made to it) and your execution of it. Return to what drew you to trading in the first place: developing or learning a strategy that consistently produced profits. Trading is difficult, so return to loving and embracing the challenge. A run of good fortune can make us sluggish, and a major setback is often the wake-up call.

Practice and Rebuild Confidence

Following a significant loss, confidence may be low, indicating that the mind is not in the right frame of mind for trading. Without a clear mind, you may skip trades, panic out of trades (trading not to lose), or be overly aggressive in an attempt to quickly return to your old winning ways. None of these are desirable. Take a step back and trade for a few days in a demo account. If you have been losing, you will most likely save money. Because it is not real money, there is less pressure in a demo account, making it easier to focus on trading rather than the financial aspect.

Start Small

A few profitable days in the demo account will boost your confidence and prepare you to return to the markets with real money. Start small after a losing streak; don't immediately return to the same position size you were trading before. Trade a small position size on your first day back. A successful day with a small position size will boost your confidence, and you can increase your position size the following day. If you have a losing day, losing on small position sizes is easier to deal with than losing on large position sizes.

Get back into live trading at a slow pace. If you're feeling really beaten up, spend at least two to five days in simulation, and when you switch back to live trading, start small and increase position size when you have winning days. Even if you win a few days in a row, increase your position size incrementally, so it takes about a week to get back to your full position size. Some people try to rush back into live trading after a big loss, when they aren't ready. They end up losing more. Some traders repeat that cycle and never recover.

After you have traded bigger position sizes, it's annoying to start back with a small position size, but it's for the best. Bouncing back from a losing streak is about getting back to basics and implementing a strategy well, not actually about making money. Money comes from implementing a strategy well. Demo trading and trading small position sizes gets you refocused on what's important, so you can start building your confidence again. The money will come, naturally, without being forced.

If you've just taken a big hit, stop trading for a couple of days. When you come back, look at your trading plan and your trading, and address issues as to what is causing the problem, and make any necessary trading plan changes. Then trade in a demo account for a few sessions to help build confidence. Only switch to live trading once you have had a few profitable days and are feeling more like your old, successful self.


0 views0 comments

Recent Posts

See All