Coping with Emotions After a Big Trading Loss

By | December 29, 2015 4:44 pm

Trading losses can end a career in a matter of a day, an hour, or in extreme circumstances even a few minutes.  Here I outline some of the ways I have dealt with losses in the past and how I got over the hump.


1. Stop Trading Immediately

Pull your hands off the mouse and ask yourself, did I follow my rules and trade my setup correctly according to my plan, if so then you’ve done nothing wrong. If you broke a rule or made any sort of impulse trade, get up immediately and walk away from the computer, come back in few-mins when you’ve had a chance to collect yourself. There are over 250 trading days in the year, you’re not going to miss out on the BIG trade that makes you a lot of money within the next 5-mins.


2. Call your trading Mentor

If you haven’t already done so find a trading Mentor, someone who trades similar to you or whom you have learnt trading and whom you TRUST. Confess your mistake and make a VOW will not repeat it, Talking soothes you down.

If you’re finding that you become extremely emotional every time you take a loss then you are trading too large for your account size, or the money you are trading is “scared money,” money that you can’t afford to lose. You need to step back and reevaluate the bigger picture and where trading stands in reaching your life goals etc.

3. Go for a walk

That’s right, this step is absolutely crucial. Studies have shown that simple exercise such as walking helps the clear the brain and lift your mood. Go for a good 20-min walk in a place with trees or water and just try to relax. If you play a sport or enjoy biking or exercising this would also be recommended.

4. Visualization or Mental Rehearsal

One strategy is to practice your response to negative scenarios using visualization or mental rehearsal. We may never be able to entirely avoid the negative feelings associated with a loss, but we can learn, with practice, to not act out on those negative feelings, e.g. revenge trade due to anger being being stopped out.


What if my loss is really BIG?

If you’ve suffered a big loss from breaking your rules, impulse trading, or revenge trading there are some things you can do in addition to the steps above.

First off it’s important to set daily loss limits in your trading account to prevent total destruction of your account in the case of an emotional meltdown where you find yourself clicking frantically and scream at the market throwing your keyboard and pounding your fists leaving you questioning the meaning of life.

3 things NOT to do when suffering from a trading loss

  • Drastically change your strategy – chances are it’s not the strategies fault, go back and review your trades to see if you followed your setups exactly.
  • Blame the market – The market, while incredibly humbling, is never at fault for a loss. You must claim responsibility and be held accountable for your own trading actions.
  • Try to make it back – After suffering a big loss you must clear your head and reset back to zero. Each day is a fresh start and you should not dwell on the past, all you can do is not make the same mistakes again and move forward.

5 thoughts on “Coping with Emotions After a Big Trading Loss

  1. Nikhil Patel

    good articles sirji, time n again ur articles help bring things back in perspective n keep us mentally fit n ready to trade. thanks a lot for ur efforts through the year n for years to come !!


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