In my experience, you need to master the emotional rollercoaster of loss before you can become a successful trader.
To do so, you must experience loss at some point in your journey.
Let me explain what I have learnt from my journey.
Two types of loss
I have an easier time accepting being wrong than giving back a profit when my analysis was correct.
It may sound trivial, but this is my biggest challenge as a trader.
Being wrong from the get-go
I know I will not be correct 100% of the time.
I deal with a statistical edge and cut my losses short while trying to let my winners run.
When a trade goes against me, my stop loss protects me.
I learned to step away from the market after three losses, which works for me.
It is never a fun experience, but it is a clean process and sometimes even a learning experience.
The gut-wrenching feeling of having a profit turn into a loss
This is by far my most problematic area of trading.
- I take my entry, and the market moves as I predicted.
- I am in profit but have not reached my target.
- The market reverses, and I see my profit turn into a loss.
- My stop loss is not triggered, but I am now in negative territory.
- Then, the market moves in my favour, and I close the trade with a small profit.
Phew.
And now, the market is moving in my predicted direction and continues well past my initial target.
This is the emotional rollercoaster of trading.
In one short trade, I experienced profit and loss, feeling okay about securing a small profit, and finally regretting not staying firm, thereby giving away a potential profit.
Needless to say, this trade will leave a bitter taste in my mouth as I have failed to follow my trading plan.
Summing it all up
I would love to say that I am well past this type of trading. But I am not.
But it does happen less often these days.
I am more inclined to tamper with my trades when my last trade was a loss.
On those days, my solution is to enter my trade, set my stop loss and target, and then walk away.
