As a forex trader, losing trade should not be seen as a problem. But losing multiple trades in a row can be disheartening and might be signalling a problem with a trader's trading system or a problem with the trader itself. How a trader handles such losses greatly impacts the trader's profitability and success in trading.
When you face a losing streak as a forex trader, it is best to temporarily take a break from trading the market, to protect your trading capital and prevent further losses. Accepting your loss enables you to get rid of bad emotions and take a more decent approach to solving your trading problem. For you to solve a problem you need to know the cause of the problem, accessing your trading plan and trades will enable you to know the cause of your losses. Losing multiple trades can be caused by changes in market conditions, bad emotions, underconfidence and overconfidence when trading, a bad risk management plan, or a problem with your psychology. After accessing your trades and knowing the root cause of your losses, you should make changes before returning to trading the market.
Changes in market conditions can very quickly turn profit into losses if you fail to make the necessary adjustments. When trading, you need to have different approaches to trading different market conditions such as changes to the market structure and volatility, market structure changes when a market goes from a period of consolidation into a trending market or when an uptrend turns into a downtrend, you should quickly adapt to such changes to prevent losing money. Market volatility changes with the amount of volume traded in that market, and an increase in a market's volatility may occur due to the impact of a news release, you need knowledge about forex fundamental analysis to avoid losing to such news releases. You must stay up to date about upcoming news releases, you may avoid trading such news releases directly. Rather, wait for the market to show its direction and take traders accordingly.
When trading you should try as much as possible to eliminate bad emotions that may impact your decision-making. As a forex trader, you should avoid taking trades out of emotions. After losing a trade, avoid revenging the market. Taking a short break from trading will enable you to regain control of your emotions, and you may get involved with activities that will enable you to reduce stress. Activities such as watching television or playing sports will help reduce pressure and improve performance.
As a forex trader you should be confident about the trades you take, but being overconfident may have a bad impact on your trading career, overconfidence may lead to overtrading and believing you can control the market, this will cause you to lose your trading capital in the long run. You must accept you have no control over what the market does, only trade with the market and never trade like you can control which direction the market will go. Also, underconfidence or trading with fear may be the cause of your losses, having a better understanding of the market and your trading system will help you stay less pressured and confident when trading.
Risking all of your capital on a single trade is pointless, as profitable traders are not made overnight rather being profitable is built over time. By having a proper risk-to-win ratio, you should avoid risking no more than 2% of your trading capital, this way you can trade without fear and make better decisions when trading.
Your psychology and approach to trading may also cause you to lose trades, having the right mindset towards trading will enable you to stay focused and trade through losses. You must accept losing as part of trading and as a way of learning and improving your trading skill. Only take trades according to your trading system. To avoid losing, you must stay disciplined and patiently wait for the market to show you what direction to trade. Profitable traders are those who don't only know how to trade but also know when not to trade, avoid taking trades if the market is not clear and only trade when you have an edge as to which direction the market will go.
Another factor that may cause you to lose trades is trading assets or instruments you do not understand. Trading forex instruments is a complex thing to do, different tradable instruments should be treated differently. You must avoid trading multiple instruments all at once as this may lead to confusion, rather you should focus on a single asset at a time. Analysing a single asset at a time will enable you to focus your mind and effort on such an asset, eliminating stress during analysis.
For all traders, having a losing streak or consecutive bad trades can be hard to deal with. But most traders, at some point in their career, may experience consecutive losses, as stated above the approach to deal with such losses. Traders who may suffer from uncontrollable emotional and psychological problems when they lose money may seek medical help to recover, you should know losing is not the end of life and trading is a skill that can be improved on.
One last aspect that should be looked into as to the cause of your losses is your trading broker. A bad trading broker may be involved in activities such as churning and excessive commission charges, it may be difficult to make a profit with such a trading broker. Online research will help in identifying a genuine broker to sign up for, consider signing up for a broker with a normal commission charge and a broker that allow communication between them and their clients.
After taking time to access and solve the cause of your losses, the next is to return to trading. You can start by testing out your new system on a demo account, keeping a trading journal at this time will help you track your progress. Only go back to trading a live account after a positive result such as making consecutive wins is achieved. When going live, you should start small and worry less about the missed trades, this will help build up your confidence and get back to the profitable trader you use to be.
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