Forex loser – the one who loses. So many beginner traders think so. And some are happy to use this idea for their own purposes. Take losses and live in peace. Change the habit of feeling guilty for losses and become a successful trader.
One of my main goals in working with traders is to help people understand what trading in general is, what kind of profession, occupation, what are the features of this lesson. And not just bring information about how the human psyche works. In addition to all this (certainly important material), there is also such a component as “trader’s thinking”, which, unfortunately, is very often neglected. Beginners are especially guilty of this.
And since they ignore this crucial component, they never reach the point in their professional development in which they could provide themselves with predictable results in the market.
Do not predict market behavior, but achieve predictable trading results. These are two big differences.
However, in today’s article, I want to talk about the inevitability of losses. And I want to give you a simple practice, which I urge you to do right after you get a losing trade. Next, we will see how it works and why it is effective.
But first, a short preamble.
Once upon a time, I heard one interesting statement, which is attributed to a prominent Russian psychologist. It reads: “all children are born geniuses, adults make them fools.” As with any controversial hypothesis, this one also has some truth.
The fact is that so many of us were brought up in severity. And the main education system in our country is based on fear. On the principle of “do not do it, otherwise …”. The following is a colorful description of the probable and inevitable punishment according to the principle, the worse, the better. Since childhood, we get used to being afraid and waiting for punishment for wrong actions.
Gradually growing up, we build around ourselves a kind of mental protective wall. It simultaneously helps us defend ourselves from suffering and get what we want by upholding the correctness of our own position.
We begin to base our self-esteem on the fact that we stubbornly adhere to our opinion even when we perfectly understand that it was erroneous. We are sincerely convinced that our values and our worldview are the only true ones. We get used to take up a circular defense and wait for the attack of the outside world.
Coming to the market, we are faced with a completely different reality. We have to learn to admit we are wrong. And the faster, the cheaper this recognition will cost us. Accordingly, we also have to learn to accept losses. After all, they are precisely the most accurate and concise expression of our wrong.
Such openness to vulnerability is completely alien to many of us. Therefore, risk management is one of the most difficult things in trading. Our natural reaction to such openness is to fight it. We have been accustomed to closing ourselves and holding a circular defense throughout our entire conscious life. And here I have to agree that I’m wrong! This struggle for many ends with large financial losses.
This aversion to their own mistakes, coupled with the pain of losing so much money, can then develop into a deeply depressing experience – a real psychological trauma that can literally crush a trader psychologically and provoke an aversion to trading itself. In this case, it will be very difficult to force yourself to trade.
If this happens, then you need to take a long break in trading. It’s better to be patient and recover than to self-rape and to exhaust yourself morally. In parallel with the break, it will be necessary to do a lot of internal work in order to return to the resource state and resume trade.
Part of this inner work is to ask yourself the right questions and learn to look into the nature of your thoughts and emotions. And besides, the study of the nature of the market also contains a huge share of this work.
LOSSES ARE INEVITABLE. TAKE IT FOR GRANTED
The market is unpredictable (fortunately). But there are times when his behavior coincides with your expectations. It is at such moments that you make money. And it is precisely at such moments that it seems to you that you have found the very Grail. Learned to understand the market. And the more you believe it, the stronger your disappointment will be when the market changes its direction, and you continue to move in the same direction.
Very often you will be right about the general direction of the market, but you will not fall into the amplitude of this movement. You will open a position, and the market will first make your stop, and then calmly move in the previously assumed direction, but without you. It is at such moments that traders have the idea of dishonest brokers and the “hunt for stops”.
And you can say: “in this case, it is better not to put a stop loss.” But the problem is that in this case, only one time is enough when you make a mistake in your assessment of the situation (and this will happen, you can believe me) so that you lose most of your deposit. If the market does not turn around and continues to move against you, it will be very painful.
Or you can try to approach it from the other side. Increase stop size. But in this case, all trade will require a review. Otherwise, literally two consecutive unprofitable transactions can cross out the results of the hard work of several days.
You are well aware that a reliable strategy is a strategy that, in conditions of market uncertainty, allows for relatively small losses to increase profitability.
But no matter how you increase your profits, you will never get rid of losses. Losses are inevitable. They are just part of the business. “You cannot make an omelet without breaking eggs” – as old as the world, but also true. Therefore, if you do not change your attitude to losses, if you do not develop the ability to openly accept your mistakes, then it will be very difficult for you to trade.
SIMPLE PRACTICE AFTER LOSS
One of the reasons why losses have such a strong negative psychological impact on you is that you associate yourself with them. For you, failure in a particular transaction indicates your “badness.” And all your previous experience, including children’s experience, suggests that you should be punished for bad behavior and this punishment is inevitable. It is so deep in your subconscious mind that if the punishment does not come “from outside”, then we punish ourselves. This is how our thinking works.
And here is a little practice that I propose. Do it right after losing money.
Usually after losing money, what do you do? You perceive and immediately interpret what happened, based on a certain system of meaning formation, familiar from early childhood and maximally adapted to reality. Negative emotion arises as a reaction in response to the meaning that you attach to a particular event or circumstance. Without your thoughts about something, an emotional reaction to this cannot take place.
Understanding this causal relationship, you can now every time after the loss to realizing the flow of your thoughts. Algorithms for how the story is being played out in your mind that the loss you have received sucks. That you are disappointed or deceived by the market in your best expectations. That you are a loser and a loser, and so on.
NOW CONVINCE YOURSELF
You are used to taking a losing trade as a failure. You ask: “how else to perceive it ?!”. And I already said how. Like inevitability. Just like rain or snow, winter or summer, heat or cold. In other words, as a personal failure, you can consider what you could and should have controlled, but for some reason did not do it. And then with a big stretch. Is it possible to say so about the market? Could you control him? The answer is obvious.
But you could control your actions. So you controlled the size of the loss. What is the problem then? Controlled losses are necessary, they are part of the trading process. Maybe this is your personal fault? No.
Go what is called “from the contrary.” If you have the idea that you are a loser, you need to refute it.
Remember that in your life there are a huge number of examples of the opposite. Find something to say thank you to, which you could rightly be proud of. Even all the biggest losses in trading are not able to deprive you of this! And the results of the fact that you cannot control clearly do not testify to you as a worthless person.
No need to try to prove or disprove anything. Just mentally go back to your past positive experiences. It will challenge negative thoughts. Most likely, if you manage to do this, then you will feel a surge of positive emotions. Mentally fix this state. With a certain sequence and practice, you can cause this condition almost automatically, according to your desire.
When you feel the ease of this inner state, you will realize that you have become both open and immune to losses. They no longer have such a heavy psychological impact on you. This energy state of lightness cannot be analyzed or rationalized. Just accept and feel it.
CHANGE DEEP BEHAVIORAL PATTERNS
This simple “after loss” practice will help you change your mind about your experience. When you approach trading with this attitude, then your ego disappears. Short-term losses become part of the process, its inevitability. Or, as the sages would say, a springboard to future victories. Where do you deprive them of the opportunity to destabilize you on an emotional level?
Studies show that it may take 21 to 66 days to form new habits or behavioral patterns. Therefore, if you want to change a certain aspect of your life, you need to not only learn new information (for example, read this article) but also practice creating new patterns of behavior. It is this linkage that underlies the cognitive-behavioral direction in psychology that I love so much and is constantly used in my work.
We have acquired our old habits for many years. Change them instantly does not work. But now you know what to do. Practice and succeed in trading. What I wish for you.