Learning From Your Losing Positions
Losses are going to happen when you are trading. It is unavoidable.
Every single trader has experienced losses in one way or another. It’s almost impossible to learn how to trade without losing money.
How you deal with losses can shape your progression as a trader and either help you learn or hinder your growth.
Below I will outline a few things you need to think about when you take a trading loss and how you can turn something negative into a learning experience.
Ask Yourself Why the Trade Went Wrong
Why did this trade result in a loss?
If it was because you strayed from your trading plan use this as a lesson on how you should avoid doing that. Do a serious evaluation of the situation and learn from it.
It’s so important to stick to your trading plan at all times So when you don’t do that and then take a loss, you need to make yourself realize that it was because you broke your own rules.
If you followed your plan and the trade didn’t work out, figure out why. You might be able to gain insights into how you can improve your trading plan. Use those insights to tweak your plan and hone in on the best possible strategy for your market and style.
Keep a Trading Journal
Some of the insights you can get by examining your losses might not be apparent after just one trade.
Keep a trading journal on each trade you make.
Make notes on the onset of the trade about why you put the position on, what your exit plan is, and any other observations you might have.
If you exit the trade for a loss, make note of exactly what happened. By doing this you might be able to spot patterns or trends in both your losing and winning trades.
This can again help you tweak your trading plan to find the best possible approach to the market you are trading in.
Losing Doesn’t Make You a Loser
While the two exercises described above are a great way to think critically about your plan, some traders have trouble dwelling on losing trades.
You need to realize that making a losing trade is just part of the game. I have made hundreds, if not thousands of losing trades in my career.
I try to learn from each and everyone of them. Learning to trade properly can cost a lot of money. However, if you use each loss as an opportunity to learn more, you will be able to avoid more losses in the future.
Even an AlphaShark misses sometimes; don’t let your losses drag you down. Instead, learn from them and grow stronger!
AKA, “The Alpha Shark”