How I Recover From Trading Losses | Step by Step (2024)

no matter how good of a Trader you are you will lose money losing is a part of the game now our job is not to avoid losing money but it's to become better at losing when it comes to trading now most Traders when they get started and they have a losing period or losing trade they allow that loss to affect them very very bad where they have gone till or have a massive drawdown or blow their account good Traders are able to take losses and they're able to adjust by identifying what the mistakes are what

they have to do and what they need to work on to actually get out of this slump in this video I want to talk about good losing versus bad losing I want to talk about how to become a good loser in trading and then I also want to share one of my personal lawsuits I recently had where I lost about thirteen thousand dollars and how I'm able to identify my mistakes and recover from a trading loss so let's talk about good losing versus bad losing now as I mentioned before you will lose on trades you

will have losing periods and so on now it's impossible to avoid that but what we do want to identify is when we do have a losing trade we want to put the big question mark was this a good loss or a bad loss now the way I differentiate a good loss to a bad loss is I look at the following so if I have a trade I ask myself did I lose my predefined risk amount was this trade part of my game plan was this setup part of my playbook part of my strategy did I

have an entry signal with this setup these are some of the questions I'd like to ask when I do look at a trade now if I do look at a trade and that trade did not fall under my entry signal my setup my game plan my risk tolerance that I typically set out that typically comes out to be a bad losing trade now if the trade does fall under the realm of I had an entry signal I followed my risk plan it was in my game plan everything with that trade really worked out but the

trade still didn't go in my favor I'll take that loss and I'll say you know what this was a good loss it's okay it's gonna happen is there anything I need to tweak or was I just wrong because you have to understand there's going to be times where everything looks great on the trade but the trade still tends to go the opposite way this is the market the market is at times random at times there are unknown things that come into the market that we can't predict or we can get ahead of and when that

happens we are supposed to take our pre-defined losses that is our job now if we Overlook something if we didn't manage our risk properly now that categorizes it as a bad loss and that is something that we need to be careful with now whenever you guys do look at any trade winner or loser whatever the case is I want you to look at these trades and identify was this a good winner a bad winner was this a good loser a bad loser I want you to start differentiating that in your trading journal go through every

single trade you have and start differentiating that and you'll start noticing so many red flags you'll look at some trades and you'll say wow I was supposed to risk only 500 but I ended up losing a thousand wow I was very impatient on this setup wow I didn't even have a setup so I lost 5 hundred dollars or I lost a thousand dollars but this wasn't even in my game plan so you realize if you start eliminating these trades you're trading profits just magically get better but then once again on the flip side there's trades

that you followed everything and it didn't work out and when you see these losses you have to accept it you have to understand this is you paying your dues to the market so because we understood that losing is a part of the game the question is how do we become good at losing now there's few Frameworks that I have that allow me to process this number one I understand that losing is a part of the game I haven't graved that in my head I understand trading operates as a business so as a business we will

have profits we will have losses so when I do take my good losses and I'm not talking about my bad losses I'm talking about my good losses when my good losses do come in that's me essentially having business expenses that's me having expenses elements that I have to pay for to be able to take the opportunities where I do make money so that's something I follow that's something I've engraved mentally so when I have that good losing trade I'm like you know what I risked a thousand dollars I had to risk this thousand dollars to

be able to capitalize on the opportunity that's present now maybe I didn't capitalize it on this time but maybe the next time I'll be able to capitalize on it so essentially becoming a good loser it's mindset shift right so you know everything else that we deal with in the world it's like losing is bad losing is bad losing is bad but with trading you guys have to kind of have that shift right that shift comes from well yeah losing is bad but in trading you know markets will be unknown sometimes markets will be difficult sometimes

sometimes you can do everything right and I'll still be wrong and if I am able to understand that and I'm able to recognize that that will allow me to not let the lawsuits affect my trading that won't allow the losses to come in and impact my day-to-day operations as a Trader I also have good risk management strategies implemented within my trading that allows me to become a good loser right that allows me to look at trades and say well you know what if I'm wrong I will lose 500 or I will lose one thousand dollars

but if I'm right I will make two thousand dollars or twenty five hundred dollars or fifteen hundred dollars at times right and then I'm also able to keep my risk minimal according to my account size some Traders are not able to become good at losing because they over trade they over leverage their account if their account is at one thousand dollars they are risking 500 on the trade right so of course you're not gonna be good at losing because one or two bad trades will wipe you out so you also have to make sure your

losses are minimal especially according to your account size so something that you guys could follow is maybe risk one percent or maybe two percent of your account size on a singular trade and keep that consistent over a long period of time before you look to size up now when you keep that consistent it will be easier for you to take on losses because the losses won't be massive they won't be big there'll be small losses that you can keep eating at if you do hit a losing period now the question is how do I deal

with trading losses so recently I had a thirteen thousand dollar losing day I posted this on Twitter on Instagram and I called myself an idiot I said I'm an idiot and I deserved to lose money today now I'll tell you why I said I deserve to lose money so my trade that I took or my trading day was all me just being stupid it's just me being honest I was completely stupid that day and I know people like oh my God why are you calling yourself stupid because I was I was being very stupid and

going back to my first point of a good trade and a bad trade that was a bad trade that was a bad day going into the session I had no game plan I showed up in front of my computer five minutes before the market opened and I was just expecting to make money with no predefined rules for the day no understanding no context of what is happening and I just jumped into the session like hey I'm gonna make money I went into both trades with having no setup no entry signal and no defined risk my

second trade that I lost ten thousand dollars on a single trade I was planning to lose about five thousand I oversized I got aggressive just trying to make money and I ultimately lost thirteen thousand dollars now the point here that I'm trying to make is when when I look at that loss that was a bad loss so it's harder for me to get over a bad loss because that's not something that should have happened in the first place if that loss was something as I mentioned before a good loss where I did have a setup

I did have an entry signal I did prepare before the market opened that now becomes a good loss it becomes a loss that I was essentially prepared for I did my due diligence I did the work that I was required to do I looked for the entry signals the market gave me the entry signals but in this particular trade none of that happened so I'm able to categorize that for myself and say that bad loss bad trading day and I need to get better now how do I essentially get over a bad losing day or

a losing day in general right so the first thing is to be able to identify why you had the losing day now sometimes you have a bad reading in the market you have a bad read on the trade you didn't understand the market context Market Direction you kind of have no idea what's going on and you take random trades so for me that's essentially kind of what happened I didn't have any of those things so I'll go back into the trade and I'll put a big question mark which is why'd I enter why did I

exit what happened in my pre-market game plan what was my game plan or outlook for the day what actually happened for the day what could I have done better was my size proper or not did I over trade in that trade right and how was my execution so I'll start looking at all these things and then I'll start breaking it down individually to identify what needs work right what do I need to work on so for me for this particular trade what do I need to work on number one I had no game plan as

mentioned so I should have had a game plan so moving forward have a game plan set the tone for the day have an understanding what is happening with the overall market number two set entry criterias what entry criteria I need to take on this trade or setup that I'm looking for I went into the day with no setup no entry criteria that is something I need to do going into the next day now when I do have a big losing trade or losing trade in general depending on how bad it is especially if it's a

bad loss or something that I wasn't anticipating I don't like to go into the next day with more size or more risk I like to either cut my wrist down and be more on the cash side and risk offside because typically what happens especially if you are a beginner and you are just getting started what will typically happen is when you lose money the first thing that pops into your brain is I need to make this money back I need to go and I need to make the ten thousand dollars I lost I need to

go and make thirteen thousand dollars I lost and you go in and you go in with the bias you go in being super aggressive you're going with just trying to make that money back and typically the way to overcome that is size down write down your thought process and what the market is telling you and you have to let go of that losing trade or day you have to let go of it you have to say I took a loss it's a business expense I'm gonna write it off and I'm going to move on from

it until you feel like you've moved on from it and you let it go it will bleed on to your next trading day or next trading session or whatever the case is so you have to get yourself to a point of letting go of that day letting go of that trade and starting the day with the brand new slate and reducing your risk so if that does bleed in your loss won't be essential so with that being said just wanted to share my thoughts on losing days wanted to tell you guys we all are going

to lose money I lose money every professional Trader great Trader whatever it is loses money I don't know what social media tells you guys that everyone is profitable every single day it's not the case I promise you it's not the case so when you have a losing day don't get upset don't get mad at yourself it's part of the game but just keep it manageable keep it small and just learn from it continuously learn from losing days as much as possible and be able to differentiate between good and losing days and that's it so with

that being said once again thank you for watching the video and I will see you guys on the next video