How to deal with losses like a pro trader

May 16, 2022

Level: Experienced

Reading time: 4 min

You’re setting yourself up for a rude shock if you rule out losses from your trading — because you’ll surely encounter them, even if you were taught how to trade by the best traders.

Losing sucks. We know that. But it’s also part of being human and being a trader.

If you are keen on trading, then you will definitely want to know how to deal with day trader losses like a pro trader. Here are some effective ways on how to deal with losses like a pro.

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Accept your losses

Take responsibility for your own losses: If you made a decision that didn’t end well, don’t blame someone else for it! Accept that it was your fault and move on. Don’t let yourself get stuck in a rut of self-blame; it’s just not productive and will only hold you back from making changes that could improve your trading performance.

Don’t be afraid of losing again

This is an important one! You’ll never grow as a trader if you’re afraid of making mistakes. The best way to overcome this fear is by doing something about it. This is why trading psychology is important, losses can mess with your emotions, but you must create rules that guard your psychology and follow them no matter the outcome.

Don’t panic or make rash decisions

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It’s easy to panic when things go wrong, but if you want to be a pro trader, try to avoid panicking. If you find yourself panicking, stop what you’re doing and take a break. Go for a walk outside or do something else that relaxes you. When you’re feeling calmer, come back and try again.

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But then, we know things can get worse. You might have hit rock bottom and perhaps lost all your funds, in this state, try to stay away from making any decisions as much as possible. You wouldn’t want to regret later making the wrong decision because you were unstable.

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What did you learn from the loss?

This is the most important thing the best traders out there do. What benefit is the loss if you can’t figure out what went wrong? Sometimes you do everything right, and the trade still goes south. But if you look keenly, you might learn one or two things from that failure.

Remember that failure is one of the greatest teachers. If you pick up lessons and keep them close to your heart, you might save yourself from big losses and perhaps be able to make and take better trades next time.

Don’t dwell too long on the past.

The past is past — there’s no point in rehearsing all the reasons why you lost money on your last trade or beating yourself up about it. Instead, focus on what happened and use it as an opportunity to improve your trading skills so that next time won’t be such a loss!

Make sure you have an exit plan before you start trading.

If something goes wrong during your trading session (and it probably will), make sure that you have an escape plan before starting out. If there’s no way out of the situation other than leaving your position behind and taking on another one later down the road, do so without hesitation—don’t stay around hoping things will get better when they won’t!

Bottom line

Everyone, even the pro traders in the world, take losses. The number of trades that you take and get good results from are not a measure of your ability as a trader. As long as you follow your rules, over time you’ll be profitable.

When you’re trading, there are many reasons why you might have a loss. It could be that the markets were in an overall downtrend or the stock had bad news. The point is that losing a trade does not mean that you are a bad trader, nor does it mean that you should change your trading strategy or quit.

That said, pro traders don’t joke with their trading psychology and risk management analysis, neither should you.

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