A significant part of trading success involves learning how to handle losses effectively. If traders follow these guidelines, it would greatly enhance their performance:
- Ensure losses from a single trade do not prevent you from being profitable for the morning or afternoon;
- Avoid losing so much in the morning that you cannot bounce back and end the day in the green;
- Prevent losses from a single day from impacting the ability to have a profitable week;
- Guard against losses from a week hindering the possibility of a successful month;
- Protect against losses from a month negatively impacting your annual profits.
Psychologically, overcoming defeat is beneficial and strengthens one’s ability to recover and win. Losing in the wrong way – by taking excessive risk – robs you of the potential victory of going from red to green.