One of the toughest things that traders have to deal with is handling their emotions after losses.
I am sure many traders over the last week have experienced some pressure in their trading account with the large market moves in both directions.
Processing that mentally and emotionally as well as deciding how and when to get back into trading is something you must learn to be successful in your trading business.
Everyone Has Winners And Losers
The first thing you must realize is everyone has winners and losers no matter how good they are at trading. It’s important, in the heat of the moment to try and limit those losses, but sometimes there are inevitable.
One of the best ways to get over trading losses is to get back into the market once it settles down and trade smaller. Perhaps waiting for a day or two when the market has not moved a standard of deviation.
You can also change up the way your trading style, for example, if you were trading non-directionally maybe do some spreads that are directional.
Also selling puts on beaten-down stocks that you would like to own is another way to trade directionally, but with more safety. With those though it’s probably best to sell put spreads, so if the market does continue to move against you, you have some protection.
When the market begins to trade more peacefully and you put on non-directional spreads be sure to add far out of the money puts and calls for protection.
As you get back into trading, I can’t emphasize enough the importance of trading smaller. Also, you must not over trade. Put on one or two positions and work your way up as you become more successful.
This will greatly restore your confidence and comfort level with your trading business. As always have a solid plan for when you are getting in and when you were getting out whether at profit or loss so that you don’t freeze when a trade goes against you or get too greedy when a trade is working well for you.
Capital preservation is key especially after some very tough losses.
– Mark Fenton of Sheridan Mentoring