In trading, losing days are unavoidable. If you cannot handle bad days in trading, staying away from trading entirely is advisable. The good news is that traders can learn ways to deal with bad trades.
Losing trades does not make you a bad trader; what does is not learning how to deal with these trades. A lack of knowledge on dealing with bad trades can expose traders to even more losses. It can also lead to potential personal and mental issues.
To avoid several complications that may arise from bad trades, the best thing to do as a trader is to learn the expert-proven ways to deal with bad trades, as I have explored in this article.
Let’s get right into it!
Top 10 Ways to Deal With Bad Trades
1. Accept Responsibility
You need to learn to accept the outcome of every decision you make as a trader. You are the sole determinant of your trades’ results; other factors are secondary. If you blame others, you only admit that you cannot control your own trading. This attitude will only make things worse because there is no point in putting effort into what you cannot control.
There is always an excuse for losing a trade. However, even though you might have a good one, you must accept responsibility first. Doing this will make identifying what could have been done differently easier.
2. Analyze Your Losses
The second proven way to deal with bad trades is to find out what you did wrong. Learn from your mistakes to avoid reoccurrence. Honestly, analyzing your losses will save you from making the same mistakes later in the future.
This task might seem daunting, but you need to be as objective as you can so that you will be able to get to the root cause.
Unfortunately, it is easier to be manipulated by emotions. You can only identify the cause(s) by staying level-headed.
3. Review Your Position Sizing
Another thing you need to do when you make a bad trade is to review your strategies in trading. You should ask yourself these honest questions: are you using the best trading strategies? Do you need to correct or change your position sizing? Do you need to garner more knowledge in some aspects before you take your next trade? Etc.
You might need to abandon your old strategies and pick up new ones. This will allow you to view the market from another point of view and will surely help your trading abilities.
Although it is hard to drop old habits, you should always be ready to unlearn and relearn when it comes to trading. This is one of the best habits of successful traders.
4. Set A Stop Loss
I always advise traders at TradeWithMac to set stop loss – it is the best and most important strategy to avoid liquidation. No matter how confident you can be about a trade, you must always set a stop loss.
Every trade can only go two ways, good or bad. Understanding that not all trades can be good, no matter your level of expertise, will help you immensely.
5. Review Your Exit Strategy
Reviewing your exit strategy is the fifth tip on the best ways to deal with bad trades. Honestly, not all battles are worth fighting. Traders should learn to leave the market when necessary. You should understand that you need a good exit strategy to become a successful trader. You can’t achieve anything with greed; you tend to lose more. As you learn to set your stop loss, you must also learn to take profit at the right time.
6. Take A Break
You might need to take a break after a big hit and return to trading with a clear mind. Sometimes, being overfocused on trading can make you miss crucial points. You do not want to realize at a later hour that the solution to your bad trading habit has been staring at you all along without you taking notice.
7. Rebuild Your Confidence
It is easy to lose trust in your trading abilities with one bad trade. Your confidence can be low, and you might become too afraid to take other profitable trades if handled incorrectly. Work on your courage to avoid being too discouraged to take other trades. See mistakes as they are, pick the essential lessons, and move on.
8. Start Small
Don’t be overly aggressive with other trades to regain lost funds. This attitude will only land you in a bigger mess. Try not to jump back to the same position size you were trading. Rather, take smaller trades and build your portfolio gradually.
I understand that it can be annoying to take smaller trades after you have traded in a bigger position size. However, you can’t afford two big losses in a row. Bouncing back from your loss requires you to go back to the basics.
9. Realign Your Focus
You were probably overconfident when you started trading before the market “put you in your place.” However, this should not make you lose focus on why you entered the market or started trading in the first place.
Find what attracted you to trading from the beginning and focus your interest on these attractions.
10. Garner More Knowledge
The final tip on my list of the best ways to deal with bad trades is acquiring more knowledge. Your loss might be due to your lack of knowledge of the trades you are taking. Unfortunately, some traders are half-baked yet present themselves as one who knows everything.
According to Ralph Waldo Emerson, “Continuous learning is the minimum requirement for success in any field.” Therefore, it is not advisable to stop learning because you believe you are good at making trades.
Conclusion on The Best Ways To Deal With Bad Trades
Learning never stops, especially as a trader of any financial market, instrument, or asset. Read articles, watch videos, and research trading to avoid more losses due to ignorance. This article on 10 Expert-Proven Ways to Deal with Bad Trades can be your starting point.