Forex trading is a hard business. A trader has to work hard to learn the algorithm of it as well as psychologically strong enough to apply them when it comes to making money out of it. Some individuals may have enormous knowledge as far as trading is concerned, but they do not do well in trading. It is because they are not capable of dealing with the real heat.
Having losses is another inevitable issue with trading, which every trader is to encounter. It does not matter how good a trader is; he or she must face losses. In trading when a trader loses a trade, he loses in two ways
- He loses his money
- He loses faith in his calculation or belief
Losing the Money
When a trader loses money in trading, I do not think it needs an explanation of how bad it feels. Losing money on any occasion hurts. Traders are bound to err because this is a game of chances, so they sometimes lose money. In the Forex markets, a trader can lose an unlimited amount of money. He can lose an amount of money he even cannot think of. Experienced traders do err as well.
In most cases, it is not about making mistakes. The market can be unpredictable from time to time. Even excellent trade setups don’t always work. This fact may make a trader believe something wrong with the strategy. He starts adding/changing more things with the strategy; runs after Holy Grail. We know what the last consequence is. He quits after losing valuable time and invested money. Statistics show that only around 5% of investors are successful in the Forex market.
How to Overcome It?
A trader must be ready to take losses. He should look at trading as a business, and count his losses as business expenditure. Let us consider. If we run a business, we have to pay utility, rent, wage, miscellaneous spending. A trader may count his losses as an expenditure of his trading business.
Losing on Own Belief
We often ignore this issue at the time of analyzing traders’ psychology. I find this to be a severe issue. When a trader takes an entry, he throws his skill, experience, belief in it. If it goes wrong, he loses a trade on his calculation. Psychologically, it hurts a lot. We can compare the feeling when our favorite team loses a match against an archrival. Losing on own belief is often more painful than losing the money only.
How to Overcome It?
It is a severe psychological trading issue. To overcome this issue, a trader must remember that there is no such strategy in the Forex market, which is 100% successful. Even the best of the best strategy is bound to encounter losses. Typically, if a strategy is successful even in 60% cases, the market analysts consider it as a good strategy.
The Bottom Line
A trader is to take trading as a business. The market is not an ATM. Making money consistently does not mean a trader makes money on every single trading day. A trader is to have some good days and some bad days. There is no point in jumping with joy on good days or being grumpy on bad days. Just take them professionally.