Laugh, Or Cry?
"Heraclitus would shed tears whenever he went out in public — Democritus laughed. One saw the whole as a parade of miseries, the other of follies. And so, we should take a lighter view of things and bear them with an easy spirit, for it is more human to laugh at life than to lament it."
— Seneca, On Tranquility of Mind
Another interesting meditation again today and I am sure at some stage of your trading journey, you've not known whether to "laugh, or cry." I most certainly have for sure!
The best way to deal with trading losses is to accept them as part and parcel of your trading journey. As long as you stick to the rules/criteria for your strategies and manage your trades to completion, you will be profitable long term.
What you mustn't do if a trade is going against you, is let it run and hope it will turn back in your favour! You must cut your trade short at your pre-agreed exit point to protect your trading bank. A controlled loss means that the profits will far outweigh an occasional controlled loss, but if you let a losing trade run, you can end up with a devastating loss, that will put a huge dent in your trading bank and also knock your confidence big time! This can then cause revenge trading; trying to recoup that big loss as quickly as possible and you break your rules in a desperate bid to get your money back! 9 times out of 10 you will dig yourself an even bigger hole and you could even quite easily, blow your whole bank!
So control your losses when they come along, because they will do from time to time. Look at the bigger picture. Due to the historical stats/data that we have available to us, we know that we will be right many more times than we are wrong. Not every trade will be a winning trade, so we must make the right choices and react accordingly to retain profitability. Once you can willingly accept losses, you will appreciate the long term benefit of sticking to the plan.
If you feel yourself losing control or getting upset or angry, it's time step out of the heat; go for a walk to clear your head and don't start trading again until you are feeling calm, relaxed and back in the zone. In some cases, that may mean taking the rest of the day off and starting afresh the following day. It can be hard to control your emotions when things go wrong, so you need to give yourself some time if need be.
Trading can be a lonely business, especially if you have nobody to talk to; which is why it's great to have a trading buddy who you can rely on and talk through all things trading with. I chat every day to my trading buddy and we are there to support each other. That alone, can make a big difference for sure!