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How to recover from a big loss Thursday 1/22/2015 02:39:00 PM CST Tweet

Taking and accepting losses is the part of the game when it comes to trading. There is no other job in the world where you could have your monthly earnings of hard work wiped out for a several minutes. It could be very devastating and the sober and right way to react to this is to not allow emotions take over. Then it is important to go in the side lines and stay away from trading for some time, recapitulate your trading strategies, plans and rules. It is a good idea not to jump into trades again in a hurry with the idea to restore your losses at once as such emotional move will lead only to bigger losses and nothing else.

What I do is after I have stayed some time away from the market, I go hunting again as trading is very alike hunting - patiently, I go out, look for my prey, then set up the trap and only after that I could catch something so in this sense I start watching the market, looking for good and very sure win entry point, then I enter and shortly after that I take profits no matter how small they are, it is important after a big loss to start taking small profits, bit by bit rebuilding your confidence.

On the other hand, losses are our school so to say. The trader learns their job the hard way by losing money. Some say that you can know somebody only after you see them losing money. That is very true, when a person is losing, it reveals their inner part, it awakes devils within and makes their brain boil. The answer here is one word - control. As soon as you learn how to control in such a hard situation, you will be one step ahead of other traders. Okay, after this lyrical retreat, I go on with a few last words about learning from your losses. The loss will be indeed totally devastating if one doesn't learn anything from it. That is why, I recall in my mind the losing trade: entry point - why I entered there, was it as per my rules and strategy, what turned wrong, did I stop the loss at right levels and after figuring all out, mind it as to evade to repeat it. I don't say never repeat it, as in trading it impossible.

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