RECOVERY AFTER HEAVY LOSS
I am talking about devastating loss that eats huge chunk of one's account and leaves one in shock and frustration. This pretty painful situation many traders face at some point of their learning curve.
Everything I have to say about it will be based on my personal experience and will describe what I've learned dealing with it.
You just took a loss much bigger than you could ever imagine.
First of all, stop trading for a while.
This heavy hit is most likely to impact your mental state
too deep. You just are not ready to go in the battle again.
Give yourself a break from tension. Wait for disgust by trading to pass and for curiosity and desire to try it again to return.
Second thing to do: decide to trade very carefully and slowly. Supress natural desire to go for revenge and get it all back as fast as possible. Revenge trading wouldn't do any good to you. Trader can't see things clearly when goes for revenge. He wants opportunity to be there and his expectations are enormously high. Right question "what does market have to offer here" changes to wrong one: "what do I need from market".
Third rule: stop looking for a trade!
Sounds a bit strange, but the matter is: that desire for revenge is still there, within us, and we have much bigger chance than usually to "see" opportunity where there is none.
Sit and wait for the right trade to yell at you from the screen, for situation where you just can't ignore it - so strongly it feels like winning trade.
Fourth: Ignore all the trades that wouldn't allow you to get out with smallest loss possible. You just can't afford any more big losses psychologically, even if you can money wise.
Fifth: When you see the right trade don't second guess it. Just take it, like a machine that programmed to react on certain situation. In a way, try to be numb, not feeling anything. Setup - risk evaluation - trade.
Trade doesn't work out - get out. Don't second guess, don't re-evaluate. Even if you get your profit by re-evaluating original plan, it will put that gambling feeling in you that will destroy confidence and self-control.
What you need at this situation is total self-control because this is the only thing that can keep you from more hard losses.
Sixth rule: take relatively small profits not allowing them to disappear.
Yes, I know, it sounds not right: we need to fight the temptation to take small profits, and we need to let them run. But this situation is very specific psychologically and your biggest need is to regain the confidence.
Many small profits taken work for this just perfect.
In order to do all this you need to become a machine: cut off all the feelings, forget about counting money, looking at your profits or losses. Just trade in a way that helps you to restore the feeling of being in control.
You need to feel that you can take the trade when you see right one, that you can cut the loss as soon as trade shows it, and that you can take the money from the market.
In order to achieve this state you have to cut as many external links as possible. What I mean by this: stop discussing your trades with anyone, stop asking questions about what other traders think. Don't tell anyone what you are doing, don't complain and don't explain. When you keep it all within yourself, you gain the great power of responsibility.
Feeling that noone is there for you in uncomfortable but it puts you in charge and it means it gives you self control.
Not many do it, but think of it this way: not many are successful! It means in oder to be successful you have to do something different from what majority does.
In this case it means: put yourself in charge.
Heavy loss that caused this situation had a reason. That reason resided within you, not outside. So, in order to prevent this to happen again you have to fix your inner state of mind.
You can listen to advice about how to do it but nobody can DO it for you.
Vadym
P.S. I do wish you never experience this.... but the reality is, not many avoid it on early stages. |
