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Recovering from a Bad Trade: Seven Tips and Strategies

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Recovering from a bad trade, it’s really difficult. I understand the pain of a terrible trade. Trading is challenging, and comprehending the loss can be even harder. You may ruminate over what you could have done differently, such as holding on instead of selling. However, it’s essential to come to terms with the loss and focus on recovery.

One user shared his experience of losing trade on a popular forum. He mentioned starting trading at 18 with an initial capital of approximately $300. Initially, he made decent profits of $10-20 per day through intraday trading. However, one day he decided to closely monitor the market and rely on his previous day’s analysis to invest in a trade, which resulted in a loss.

Continuing his story, he explains that the trend unexpectedly reversed, causing him to lose 75% of his capital in just one day. Despite hoping for a rebound, the market did not recover, leaving him with only $100. Unfortunately, this remaining amount is insufficient to enter another trade, and he cannot ask his mother for more money as that was his source of investment. He has tried to earn money through online jobs but has not received any payment yet. As a result, he is currently unable to recover the lost funds.

There are millions of stories about bad trades. A bad trade is like an accident, and one needs a lot of self-assurance and conviction to recover. Here are some strategies you need to understand after experiencing a bad trade.

The First Rule Is To Avoid Looking Back.

What’s gone is gone. It’s like reminiscing about a time when you had trillions of Shiba Inu and millions of Dogecoin, but due to a bad trade, you never reached your desired selling price.

Firstly, it’s essential to come to terms with the fact that the money is no longer available and cannot be retrieved. Secondly, keep in mind that there are boundless opportunities for trading. Consider taking a break and refraining from trading for several weeks.

If you look back on your life and think, ‘life could have been different,’ you may struggle to move forward. Like a bad dream, it’s important to forget what has happened.

Take a Break, Don’t Start Revenge Trading.

You feel tired, and you may think that this is not what you have planned in your life, and you go back and go all in with strong emotions. This is a bad idea. And an hour later, you lose even more.

Consider this: when you resume trading, start with a small portion of your typical trade size, such as 1/10th. After making 10-20 profitable trades, you can gradually increase your position and trade with double your initial size. Then, continue trading with 20-40 successful trades at 1/5 of your normal size before returning to your original position size.

You Are Still Young. Forgive Yourself.

Life can be full of ups and downs, and your bad trade was a bad day. There will be days and weeks when you end up with a green candle. Don’t let one mistake or failure define you or hold you back from pursuing your goals and dreams. Forgive yourself.

You are still young, and you will have lots of opportunities. Forgive yourself and let go of any negative feelings or self-doubt.

Recognize that everyone makes mistakes, and it’s a natural part of the learning process. Instead of dwelling on what went wrong, focus on what you can do to move forward and improve.

Live by the Rules: Cut Your Losses and Move Forward When Your Trade Hits the Stop Level

To succeed in trading, it’s important to follow a set of guidelines or principles you have established for yourself. These rules could be related to your risk tolerance, trading strategy, or your exit strategies, among other things.

Learn this, remember by your heart, cut your losses, and move forward if your trade hits the stop level. When a position hits your stop-loss order, the price has moved against you, and it’s time to exit the trade.

By cutting your losses and moving on to the next opportunity, you can avoid losing a position for too long, leading to even larger losses.

Ignore Your Portfolio.

Ignoring your portfolio size can be a powerful mindset shift to help you make better trading decisions. It’s important to clarify that this doesn’t mean that money doesn’t matter or that you should be reckless with your funds. Instead, it’s about changing your perception of the money you want to trade.

To put it bluntly, you should treat the money you are willing to trade as money you’ve thrown in the toilet. This might sound harsh, but it can help you avoid emotional attachment to the money and reduce the tendency to hold on to losing trades or take on excessive risks.

When you trade, you should only use the money you can afford to lose without affecting your financial stability or well-being. This means setting a budget for your trading activities and sticking to it, even if you encounter losses or missed opportunities.

Hide Your Portfolio Size When Entering Positions by Modifying Your Trading Interface

One common issue that many traders face is getting distracted by their portfolio size when entering positions.

Feeling anxious or excited about the potential gains or losses is natural, but this emotional attachment can cloud your judgment and lead to poor trading decisions. To overcome this, one strategy is to modify your trading interface to hide your portfolio size when entering positions.

The exact steps to achieve this may vary depending on the trading platform you use, but in general, you want to minimize the visual cues that remind you of your portfolio size. This could mean resizing or relocating the portfolio window or hiding it all together and only displaying the specific chart or order entry window you need.

Do not forget that by reducing the visibility of your portfolio size, you can focus on the technical and fundamental factors that drive your trading decisions, such as chart patterns, indicators, news events, or risk management strategies.

Always Have a Plan.

Create a trading plan based on percentages of your portfolio and how the market is likely to move rather than focusing solely on your personal gains. The market doesn’t care about anyone; trying to control it is a recipe for disaster. Instead, it’s essential to ride the market’s movements and adjust your plan accordingly.

The market is impersonal. You can’t bend it to your will or make it conform to your expectations. Instead, you must be flexible and open to change, adjusting your plan based on market movements.

By focusing on portfolio percentages and market movements rather than personal gains, you can make more informed trading decisions and increase your chances of success. So, create a trading plan based on these principles and be prepared to adapt as the market evolves.

Have a plan in place, enter trades according to that plan, and set a stop-loss at a level where you are comfortable with the result if the trade gets stopped. Additionally, set a profit-taking level according to your plan and close everything.

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