· The Story
There was once a road called the Forex Road. The Forex Road was a two-way road. One went up the hill and the other went down. The way up was bright and shiny. The way down was dark and grim.
A man named Trader decided to take the Road upwards with the goal to enjoy the brightness at the top of the hill. The man started the journey with confidence and ease, for the more he went up the brighter it got, but soon enough he realized that getting to that top of brightness had a price.
The price varied and took many forms. At times, Mr. Trader would stumble or fall for a while before getting back on his feet. There were also those who tried to deter him from reaching his goal. It sometimes got to a point where Mr. Trader would be pushed down the hill.
Days, months and even years went by. Mr. Trader stumbled, fell, and got pushed away. Despite all of that, he never forgot his goal: to reach the top of the hill, where it was bright and shiny. So he learned to face challenges and kept on moving forward.
Today, Mr. Trader still hasn’t reached the top, but the reward of experiencing brighter days as he moves forward has always given him more confidence in reaching the end he has in mind.
What made Mr. Trader different is his power of will; his will to reach the top of what was in reality a never-ending road.
The short story above summarizes, in a sense, the world of forex trading. The two-way road could be thought of as the forex market. The way up the hill is the great potential this huge market has. The more you go uphill, the more profits you get.
Needless to say, doing downhill means one thing: losses.
It’s losses that bother traders. The reaction to them could be met with anger, anxiety, fear, or leaving the market once and for all.
We all suffer from loss one way or another, but what’s important is getting over them and moving on.
· The Lesson
Here are a few short lessons we’d like to share on how to recover from losses when trading forex:
1) Know what went wrong
Treatment comes after knowing the cause. So try to figure out what went wrong. Check your trade journal or history log to carefully examine your losing trades.
It could be that you did the mistake of over trading. Sometimes there could be something wrong with your trading strategy.
2) Take responsibility
This is where you should evaluate your situation and admit your mistakes. Try to do some damage control, learn from the consequences of your trading behavior, and try finding what you could have done differently.
3) Never lose more than you earn
Say that you make, on average, $1000 in profits. The point is that you should never risk losing more than what you earn on average, especially after suffering a loss. Some traders go for an all-or-nothing approach to compensate for the loss, but this often ends in utter failure.
Get advice from fellow experienced traders. If there aren’t any, you can always reach trusted, regulated brokers to gain some insight and guidance.
5) Demo? It depends.
If you suffered big losses, the best thing to do is to go back to using a forex demo account until you get back in shape. Once your back to your live account, trade small, that’ll help you build your confidence.
What matters the most after suffering a loss is working on getting back in shape. It’s totally fine to take a break from everything for a while if it’ll help you become better, because trading requires one to be ready and confident, which may not be the case for you after losing money.