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What Should you do After a Losing Trade?

Updated: May 10


All Forex traders have been there – obsessing about a losing trade. Trust me, it’s something I’ve experienced many times. And when you’re new to trading, these disappointments can be difficult to move past. Below are some steps to take after a losing trade.

1. Stop Trading

If a trade hasn’t turned out how you intended, the one thing you can do is step away from the situation. Even experienced traders can become frustrated in the heat of the moment. A remedy? I try to do some form of exercise. Tension in the body doesn’t help the decision-making process. Just do something that you know will help clear your mind. It could be as simple as taking a walk or talking to a friend.

2. Study your Trade

Once you’ve had some time away from your losing trade, your next task is to put it into context. It’s important to remember that all traders suffer losses – it’s a normal part of trading. Therefore my recommendation is to look at your past ten trades as one batch. In other words, determine whether your trading loss is part of a larger pattern. Depending on your experience, your profitability goal will vary. But ensure you judge that over a number of trades. If your trading loss is an exception, rather than commonplace, stick to your approach.

3. Revise your Risk Management

Should your last ten trades reveal a trend of inconsistency, it’s time to address the situation with a clear head. With that in mind, the first aspect to look at is your risk management strategy. If you don’t have one, I guarantee this is your reason for experiencing losses. A risk management strategy is simply the means by which you protect your trading capital. It’s a series of steps traders implement to ensure they mitigate their market exposure – such as using stop loss/take profit levels and checking currency correlation.

4. Analyse Your Time Frame

Have you ever stepped back to think about what kind of trader you are? It has a significant impact on your ability to make profitable trades. For example, it could be the case that you’re not well suited to taking trades over longer time frames. Therefore, if you’re a long-term trader, you need to be able to tolerate letting your trades run their course. Often, they’ll be periods within these longer time frames where natural price fluctuations will dip your trade into the red. And this can happen even if your position is correct.

Conversely, if you’re an intraday trader, you could be having trouble with your entry and exit points. Trading over shorter time frames is more intensive; it requires you to be at your trading station, keeping a close check on price movements. Should your circumstance limit your ability to spend this amount of time on trading, consider moving to a long-term strategy.

Determining optimum entry and exit points is something a lot of traders struggle with. But the topic is often made more complex than it has to be.

5. Do you have a Trading Buddy?

I’ve found the phrase “a problem shared is a problem halved” to be true in every aspect of life. Forex trading is no exception. It’s why I encourage you to find a trading buddy. In other words, another Forex trader who you can regularly talk to for feedback and support.

I hope you’ve found this blog post useful. Remember, losing trades are to be expected. But don’t become discouraged – mistakes are how we learn and make progress.

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RISK WARNING

Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. Whilst the high degree of leverage can work for you, it can also work against you. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. There is always a possibility that you could sustain a loss more than your initial investment. Accordingly, you should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.