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Can you recover from trading losses?
Written by: PaxForex analytics dept - Tuesday, 05 January 2016 0 comments
While losing a few trades in a row does not necessarily mean you need professional help, it does mean you need to stop and pull yourself away from the market and objectively think about your trading decisions. Over trading and obsession with the market are two very real problems that many traders experience, with a little time and effort on your part you can easily overcome these often made trading errors.
If there is one feeling that currency traders universally abhor, it would probably be the emotion derived from watching a losing trade turn deeper and deeper against them. At this specific point in time you are watching yourself getting poorer by the pip—the complete antithesis of why you trade. If the trade is left unchecked things can get really ugly very fast. An overleveraged position can lead to an outsized loss and as a position can move against you for an extended amount of time.
You are probably aware that one of the most important concepts that you have to understand in order to achieve forex success is that you must maximize your profits on your earning trades whilst minimizing your losses on your losers. If you are a novice or have been trading for a short time, then you may have already experienced a run of poor performances. You must always remember
that even successful forex traders suffer more losing trades than earning ones. However, they always ensure that the risk/reward ratios of their trading strategies guarantee that they will achieve profits over the long haul.
One of the many fears that traders have when they enter a draw down period is that they will not be able to make the money back. And the only reason they do not believe they will make the money back is if they do not have confidence in themselves and their system. Or they have not broken their system down into a process that they can follow day after day that can find the great trades. It is that fear of not being able to find the great trades and make the money back that can cause a vicious death spiral for the trader's account.
You can recover your losses by accepting your mistakes; there’s no use denying it or blaming someone else for it. Mistakes are allowed and they’re what will make you into a better trader. The correct approach is not to leverage up and risk far more than you normally wood. The safe, conservative approach is to keep risking small amounts per trade as you previously were, or to actually reduce the risk per trade and cut back on risk. Then you need to search for an extremely good trade or series of trades that have an extremely high reward risk ratio.